I am finding that small traders are not being careful enough about who their customers are.

If the debtor pays there is no problem. If he does not, few realise that directors are just NOT responsible for the debts of their company. That means that the only asset left available to  an unsatisfied creditor if he sues is the company seal!

Let me spell it out. Mr Brown suggests what work he wants. The price is agreed. He then asks that the invoice be made out to his company. If he does that after the work, Mr Brown himslef  is liable. If he asks before the work is done then the company was introduced into the contract and the company is liable.

A company in financial difficulties just does not pay. What money it has is removed by the directors, fees salary, other debts etc and all that is left in the company is the company seal. Suing the company is not an option.  The director is not liable. He is sheltering behind the li ited liability company. The company may have cost only £100 to set up and the delinquent director is fee to set up his next one.

Remedy: amongst your terms of trade should be a term ( togethe with reservation of title etc) along these lines:

The person signing on behalf of the company by signing accepts personal liability in the event the company fails to pay according to the terms.

Landlords – not every instruction we get ends successfully.

Approximately one in five enquiries these days come from landlords. The picture is almost always the same. The luckless landlord has given the tenant every consideration, waited for the promised rent, allowed substantial arrears to build up and then come direct to us or first got judgment and then come to us. Its all the same.

We have been in business for 50 years now and only in the last years has this problem assumed such proportions. We earn our fees by collecting from debtors. Sadly we tell landlords that they are wasting their time.  We are unlikely to be able to help. It could have been different if the tenant had had a guarantor, but if a tenant cannot afford the roof over his head, then what can he afford?. The landlord’s best bet, we tell him,  is to get vacant possession and re-let.

But what about when they come with a judgment? It is a court order to the debtor to pay. Enforcement is problematical and costs £100 or so. The general picture is that the tenant never had much worth and anyhow the landlord does not know where he went to. A sad picture. We use a tracing agency, if asked, but to what purpose? Often before the landlord can find where the tenant had moved to, the tenant has moved yet again – to cheat the next landlord. I’m sorry, but the picture is bleak.

Commercial rents are a happier story! Different techniques! 80% success rate

leslie m wise

Interest or Penalties on Outstanding Accounts.
Creditors should collect their interest

On 1st November 1998 small business suppliers gained the right to charge interest on accounts paid late. For more than one hundred years if a contract neglected to stipulate what was to happen when accounts were not paid timeously, that was an end to the matter and the unfortunate seller had to go without interest. From as long ago as 1978 it was recognised that larger concerns were using their weight, abusing their weight, and mercilessly delaying payment. The problem came into sharp focus in the recession in the early 1990′s, but it took until 1998 to try to provide the remedy. Read more…

Safety first – Better control of your debts

Do you really have control of your debtors?

Anybody can sell if he does not expect to get paid. Time and again businesses achieve their sales targets, yet go to the wall, because they have cash flow problems (17,000 companies alone in 2005/06). And it is not just the new and inexperienced businesses either.

One of the secrets of survival is proper control of the sales balances outstanding. Monitoring them starts with a list. It is sad how often that list is produced in ABC order? Every list is an opportunity to rank the contents in some order or other. There are only two arrangements. ABC order is not one of them. Who cares whether the £10,000 outstanding for two months is owed by AA & Sons or ZZ Ltd? The amount and the period overdue are all that count. Read more…

The Statutory Demand – a dangerous weapon or a cure-all? Getting really tough with the debtor

Statutory Demands – the last resort

Getting in all the monies due can often be a nightmare. Even with a good system in place the best regulated businesses can still experience the occasional determined non-payer. Read more…

Romalpa – if he won’t pay, take your goods back

I have long criticised the accountant’s approach to Romalpa Clauses – the term in the contract which allows the unpaid seller to re-possess his goods (because title has not passed). Contracts may be for lawyers, but it is Accountants who verify stock and the schedule of bad and doubtful debts. A doubtful debt where the client can recover the goods must be worth more than one where he can’t. Read more…

Two tales of debt collecting

A sad ending

Recently we were pleased to receive instructions to collect over £9,000 due by a small firm of builders. The debt had accumulated more or less steadily over the previous seven months.

Large debts call for immediate measures and I handled the account personally. Read more…