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Debt Recovery
Whilst the research for this article has
been done predominantly in the UK, a similar if not identical process
applies in the US, South Africa and Australia.
It’s a sad but very true reality that, when doing business, there will
always come a time when customers or clients fail to pay their debts.
Worryingly, the effects of this can be devastating for smaller
organisations. UK business and finance resource BizHelp24 estimates, for
example, that a company trading at 7.5 percent profit with an account
overdue for 60 days will have around 50 percent of its ‘bottom line’
profit eroded as a result of the owing debt.
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Until 2000, this harsh reality was even more severe and was having dire
effects on UK entrepreneurialism. Smaller organisations, in particular,
simply did not have the funds to go through costly reclaim processes if
and when they were owed money. The ‘late payment of commercial debtors
with interest’ legislation of 1998 (which came into effect in 2000), was
designed to eradicate this problem and to enable smaller businesses to
grow and remain competitive within Europe by putting an end to crippling
debt. This legislation means that companies can now chase up debt on a
more regular and systematic basis.
Yet, while this legislation makes it more financially viable for UK
businesses to chase up debt, such activities are still extremely resource
intensive. This is where debt recovery specialists fit in. A number of law
firms across the country have practices dealing specifically in debt
recovery, while a number of firms also focus solely on this area of the
law.
You'll not need to search too far and many links exist upon this website.
Such practices have the ability to rapidly
meet the changing demands of the sector – for example, quickly
implementing new regulations or reflecting new areas of compliance. This
was becoming increasingly time-consuming to achieve with Thomas Higgins’
previous database system. Therefore, following a comprehensive procurement
process, the company selected InterSystems Caché post-relational database.
The debt recovery process
Debt recovery processes in the UK can be broken down into three clear
stages
1) Letters Before Claim (LBC) are issued to debtor organisations, advising
of monies owed and requesting prompt payment. In the majority of cases
(around 80-90 percent), an official letter is sufficient to rectify the
situation. Thomas Higgins issues a huge amount of LBCs per month and, due
to operational efficiency, can charge clients a fixed fee per letter.
2) As a second stage, organisations may process a Court Action against
their debtors. In order to take such proceedings, the creditor requires
sufficient evidence to make a claim. Thomas Higgins charges a flat fee to
collate a case history and produce a claim using its Claim Production
Centre (CPC), ensuring clients never end up with nasty surprises at the
end of the process.
3) The third and most serious level is judgement and execution. County
Court Judgements (CCJs) or High Court Executions can be issued via the
Lord Chancellor’s County Court Bulk Centre (CCBC) the same day, once
instructed by the client. Depending on the amount owed, either a County
Court Bailiff or High Court enforcement officer will attend in order to
retrieve the debt. Thomas Higgins liaises with these third parties to
ensure a smooth, end-to-end transition throughout the process for its
customers.
The process of claims management can be highly resource intensive, and
most practices continuously seek to create efficiency though proficient
internal administrative processes. Such savings and efficiency can then be
reinvested to offer customers a responsive fixed rate service with ease
and transparency of use, such as online client instruction.
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Gaining and retaining competitive advantage
InterSystems’ Caché is now at the heart of most practices operations. The
firm is able to send its claims, judgements and executions directly to the
Claim Production Centre (CPC) and the County Court Bulk issuing Centre (CCBC)
by interfacing with the Court’s systems, allowing it to give clients the
best possible service and least delay in debt collection. With the
company’s previous database, this process used to take around 45 minutes,
but with Caché has been reduced to under five minutes. This allows
practices to be able to extend its client cut-off times, enabling it to
issue more proceedings on the same day.
Caché’s Rapid Application Development environment has enabled debt
collecting practices, and their Debt Claim System to be fully revised and
improved beyond the original scope of work, and within the same
timescales. For example, the firm has been able to redesign its Graphical
User Interface, implementing new changes such as additional functionality
and usability extremely quickly.
Caché has also enabled the law firm to dramatically improve customer
service through its web front-end and to introduce a unique online
automated debt recovery process, allowing clients to initiate and track
all actions themselves. Its speed, efficiency and accessibility deliver
significant competitive advantage. Debt Collector's online clients now
receive automatic e-mail, SMS and fax updates as and when any changes or
developments occur. The rich web user interface provides clients with full
access to all their cases, whilst amendments are reflected automatically
between the web and core Debt Claim systems – and vice versa, triggering
relevant notifications.
Since the rollout of this service, these debt collecting practices have
experienced a growth of around 150 users per month, indicating the real
value that customers experience and leading everyone to view and accept as
a great success.
The performance and power of Caché was also fundamental in convincing the
practices to select the system during the procurement process. Internally,
its old system encompassed around 80 percent of the debt recovery process.
The new automated Debt Claim System, however, now manages 95 percent of
the entire process, providing a clear productivity boost to the
organisation.
One example of how Caché is making a real difference to debt collection
services competitive advantage lies with a change in the law to withdraw
the monopoly that the Sheriff offices had. With four weeks to go before
change-over and with even the newly appointed enforcement offices unaware
of what the process of law was going to be, any firm of solicitors dealing
with the transition from Sheriff officer to enforcement officer had a
major hill to climb. With regards to court form changes, changes in
different court processes and in how to deal with the enforcement officer,
as well as any instructions received before the cutover date, had to be
dealt with by the sheriff officer. Therefore, most practices had to devise
a way of automating this to run both systems side by side. Caché allowed
debt collections to rapidly develop software to do this. The ease with
which Caché could manipulate, insert and update data meant the firm could
update the new values and make them available to all relevant elements of
the system.
This level of flexibility is not unique. Caché continues to give any Debt
Recovery Services the ability to respond to market changes and customer
demands, providing the most favourable pricing strategy, thus ensuring
that it is always competitive.
From the IT team’s perspective alone, Caché has even provided some real
benefits in terms of work/life balance. Caché’s compact size and massive
scalability allows practices to replicate its database on a notebook,
affording developers the flexibility to work offline, to send e-mail
updates on progress or remotely implement changes, meaning they are not
tied to the office.
Looking ahead
Caché has dramatically exceeded debt collection expectations since it was
implemented: it has enabled the all practices to improve its Debt Claim
System, boost customer service, increase productivity and efficiency, and
respond to market changes and customer demands more effectively.
OPTIONS FOR DEBT COLLECTION
Debt factoring and invoice discounting: the basics
Improve your cash-flow by selling your debt to a third party and getting
cash up front before invoices are paid
Recovering late payments
Actions you can take if a payment you are due becomes late
Preventing late payment
How to ensure that business customers pay their bills on time and why you
should pay your bills on time
Getting paid when selling overseas
Guidance on payment terms and methods, credit control and non-payment
insurance
Recover debt through court
Steps to take before legal action, using solicitors, debt recovery agents
and pursuing a legal claim
Avoid insolvency
Keep an eye on cash-flow to help you avoid insolvency and do not allow
debts to exceed assets
Recover your debts
This interactive tool helps you understand the various ways in which you
can recover money owed to you
Calculate the interest due on an unpaid debt
Interactive tool to calculate the statutory or contractual interest you
may be able to charge
Alternatives to bankruptcy
An interactive tool to help you investigate alternatives to declaring
yourself bankrupt
Assess the health of your business
Use our interactive tool to assess how well your business is currently
performing
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The content and materials provided in this
web site are for informational and educational purposes only and are not
intended to supplement or comprise any precise facts, although we have
researched sufficiently for the facts and information to be reasonably
accurate. All content and materials including research papers,
case studies and testimonials summarizing facts have been done by
individuals working for this website. We cannot be held responsible for
any inaccuracies, as we have described that information is for educational
purposes and therefore maybe a few weeks old.
Resources:
businesslink.gov.uk | BizHelp24 | fsteurope.com | Thomas Higgins
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