Late payments still afflicting businesses: why debt recovery should be taken seriously

Recent research by trade credit insurer Atradius reported by Credit Connect in December (‘Businesses Write Off £8 in Every £100 as Uncollectable’ - 23 December 2021) suggested that as much as 44%  of the total value of UK B2B sales were reported as ‘overdue’ in 2021 with a further eight percent written off entirely as ‘uncollectable’. That so many businesses are struggling with the consequences of unpaid invoices is deeply disappointing and represents a drag on overall economic performance. Small suppliers will struggle to sustain themselves especially if the money they’re owed is not forthcoming – made worse by the difficult environment created by the pandemic and hitting some sectors such as hospitality especially hard. 

Governments of all complexions have attempted to improve this situation – with the 2016 Enterprise Act, a commitment for public bodies to pay within 30 days of accepting invoices, the creation of the Office of Small Business Commissioner (OSBC) and the best practice benchmark for the private sector to settle B2B payments within 60 days from the receipt of invoice (within 30 days for SMEs with fewer than fifty employees). The OSBC can help investigate disputes against large businesses, but their powers are limited.

So many firms will naturally want to consider appointing a third-party to help collect what’s owed. Smaller suppliers can understandably be wary about jeopardising ongoing business relationships, but engaging professional debt collection agencies is widely accepted as good management practice and can help protect direct relationships. Collection agency contact can sometimes be the spur to a third-party to engage and pay, and also act as an arbiter if relations are strained. The key to remember is that commercial debt collection agencies are specialists in their field. 

Many specialist agencies will have lists of clients and testimonials on their websites to illustrate their experience and track record. They are transparent in their fees and it is a good idea to choose an agency in membership of the Credit Services Association (CSA). By doing so, firms looking for help from a collections agency can be reassured not only that the CSA’s Code of Practice will be followed, but that any customers encountering difficulties will be treated fairly and shown the appropriate forbearance if needs be. 

Collections specialists will typically investigate the status of the debt and establish, for example, if a customer is late in paying because they have a particular business problem themselves, such as awaiting a government loan or public sector payment. 

There is always the option to eventually escalate the matter to the courts if all other avenues explored prove fruitless. Debt collection agencies operating in the commercial sector can be useful in advising and helping manage this process if needs be. 

At a time when so many companies are facing difficulties recouping what they are owed, as this research suggested, it is not a good idea to wait when an invoice is overdue. Debt collection agencies are well versed in showing empathy and flexibility in the recovery of monies from customers and have the skills and professionalism to signpost firms to get advice and help appropriately. 

If your business is in need of support from a commercial collections specialist, do take a look at the CSA Member Directory as a good place to start.  

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