Don't catch a cold, make them cough up

Legislation may not be the best way to deal with late payers. Why not try a little self-help? By Roger Trapp

Late payment is high on the political agenda. Both main parties realise that the burgeoning small business sector is a potential source of support, and in recent weeks each has set out to show its commitment to solving a problem that entrepreneurs have consistently put at the top of their gripe list since banks ceased to be their pet hate.

But government intervention is not the only way to deal with the problem. The Association of British Factors and Discounters states that while it welcomes the Labour Party's commitment to change the culture of late payment, introducing the right to statutory interest is unlikely to get results. "Payment delays could get even worse as customers treat statutory interest as giving them the right to an acceptable, if expensive, type of extended credit," it states. Instead, it recommends using existing legislation more effectively to improve access to the courts: "The knowledge that any delayed payment would be quickly and effectively dealt with by application to the courts would be the most effective catalyst to bring about the necessary cultural change in the UK," it says.

However, advisers are more inclined to suggest self-help, or rather self- help with their assistance, as a way out. The firm of chartered accountants Moores Rowland, for example, encourages clients to think about debt management. Nigel Burbidge, national audit partner, says that while "a large new customer is likely to be welcomed with open arms, it also brings its own risks".

Such a customer, he adds, may seek finer margins and possibly relaxed credit terms, with the result that the business is having to work very hard to maintain customer satisfaction and can lose sight of the risk presented by a "potentially very significant bad debt".

Among the ways of dealing with this is tighter credit control - which involves companies offering reduced margins only in return for shorter credit periods and credit insurance. Other methods include carrying out proper research on customers before granting credit; setting credit limits and adhering to them; and establishing clear credit terms, and sanctions if they are not complied with.

"Most of these are quite straightforward, but it is surprising the number of businesses that fail to apply them, either through fear of upsetting the customer or through lacking the discipline internally to set systems and use them," says Mr Burbidge.

Much the same points are made by Eversheds, the national law firm. It has just published a debt recovery guide, which recommends that businesses review their bad debt ledger in order to evaluate the extent and amount owed to them.

Sue Green, head of the firm's debt recovery practice, offers a four-point plan for dealing with corporate debts:

Act quickly - put debts in order of unacceptability;

Use solicitors' letters to prompt payment - remember that the costs of legal proceedings are paid by the debtor;

Maintain complete records of payment terms, invoices and correspondence;

Take credit references before doing business with a company for the first time, ensure that contracts are drawn up clearly and protect your position by retaining ownership of the goods until full payment is received.

Businesses "should make a clear decision on the amount and length of credit for each customer and stick to it," says Ms Green. "It is best to watch your customer carefully."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
News
The fall in the oil price will hit Russia hard, but is unlikely to personally affect the Russian leader, Vladimir Putin

It looks very much as though 2015 will be a good year for the world economy, after all – and, if it is, that will be thanks to the fall in the oil price. It won't be good for everyone and we have already seen the pressure it puts on the Russian leadership – though, before you conclude that sometimes there is natural justice in the world, remember that the people who are hurt are not leaders such as Vladimir Putin. Other oil- and gas-exporting countries are damaged, too, and I think we will see further fallout in unpredictable ways. But the net impact is strongly positive, more so than most commentators at present acknowledge. The winners far outnumber the losers.

News
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
PROMOTED VIDEO
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
    Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

    Marian Keyes

    The author on her pre-approved Christmas, true love's parking implications and living in the moment
    Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

    Bill Granger's Christmas Eve fish feast

    Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
    Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

    Rodgers fights for his reputation

    Liverpool manager tries to stay on his feet despite waves of criticism
    Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

    Amir Khan attacks the Taliban

    'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
    Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

    Michael Calvin's Last Word

    Sepp Blatter is my man of the year in sport. Bring on 2015, quick