CreditPal - Take Advantage, It's Free

When I wrote 'Help Yourself - It's Free!' yesterday, I got some very cynical comments from various sources on Facebook and Linked in. "There's no such thing as a free lunch" just about sums them up.

The point is that, these days, there is a lot of free information and help around for SME's - and CreditPal is a free on-line service that's really worth looking at if your are running a small or medium-sized business. CreditPal costs nothing - and using it could get your Company the financing or credit insurance it wants or needs.

You can find out more about CreditPal by going to http://www.creditpal-online.com/why-use-creditpal. You'll find a brochure in pdf format that explains how the system works.

What particularly struck me when I began to read the brochure was one of the headings. It was right at the beginning, and it read: CreditPal enables you to access the best credit and finance for your business. I liked that. I also liked the fact that CreditPal seems to be providing a learning environment.

There is, of course, an 'upgrade' - there's always an 'upgrade'. But you don't have to go for the 'upgrade' right away. Take the free lunch! Once you've worked your way through the starters and the main course, you might want to consider paying for the dessert.

Help Yourself - It's Free!

The The Institute of Credit Management has created a series of guides designed to keep the cash flowing. Subjects include:

• Knowing your Customer
• Payment Terms
• Invoicing
• Treating Suppliers Fairly
• Credit Insurance
• Factoring and Financing
• Chasing Payment
• When Cash Runs Short
• When All Else Fails
• When Your Customer Goes Bust

You can find the guides at www.businesslink.gov.uk/creditcrunch section and at www.creditmanagement.org.uk/managingcashflowguide.htm.

New Credit Control Software for SMEs

Credit Guardian is a business credit-checking software that merges real-life accounts data with credit risk information from Experian. It has been launch by Draycir, a credit control software provider, and is intended to help smaller businesses make more informed decisions and minimise the risk of bad debt and late payment.

Credit Guardian links directly into a company’s own accounting system and merges accounts data with credit data downloaded in real time. Companies are therefore able to get a live insight into their business and trading status displayed within their existing accounting system.

For more information visit Draycir Limited.

Third Party Collection Fees - You Only Get What You Pay For

Collection agencies (and Solicitors) sometimes offer very inexpensive rates, special discounts, a 99p letter, or a 'no collection, no fee' service.

'No collection, no fee' is a dangerous option for obvious reasons. Reputable debt collection agencies usually make charges on a commission basis. Commission isn't as expensive as it used to be - but it can still amount to quite a chunk of your debt, particularly for overseas collection.

Reputable Solicitors usually have a standard scale of charges. Many of them hope to recoup all or a proportion of their fees from the interest that has accrued on the debt, and the costs that are awarded automatically whenever proceedings are issued.

Either way, you will only get what you pay for - and cheap is never a really cheap option.

It's a Two-Way Street

Your company has a right to expect good service from a collection agency - but an agency has a right to expect certain things of you, too.

The main things an agency wants from a client is that cases be passed over sooner rather than later, that the client liaises with agency personnel fully and responds to queries and correspondence and requests for copy invoices and statements quickly, and that a decision-maker is readily available and prepared to be flexible about payment plans and settlement offers.

Obviously, an agency is also going to want your Company to complete any instruction form, letter or agreement in order to enable it to take action, a provide a precise definition of the action required in each case, and prompt settlement of its accounts – but it’s really the factors set out in the first paragraph of this post that will determine the success or failure of the relationship.

Nobody enjoys trying to collect debts that have been gathering dust for months. Such debts may not be uncollectible, but they are likely to be much more difficult and time-consuming (and more expensive) to deal with than a ‘fresh’ debt would be.

No collection agent enjoys having to wait on a creditor to provide essential information when a debtor is waiting on him or her to come back with it.

And no one enjoys dealing with a client who is hard to get hold of and unwilling to accept reality in the form of reasonable payment plans and offers of settlement which are effectively offers of part-payment.

What Can You Expect from Collection Agents

Services offered by individual collection agencies will obviously differ, but there are many common factors as to the services that you might expect to receive from any reputable agency that you employ:

• Collection by series of letters and/or telephone calls.
• Collection by a by a door-to-door collection team.
• Regular updates on the position of each case. This may be accessible on-line in some cases.
• Flexibility as to receipt of payments. It should be possible for payment to be made direct to you, rather than direct to the agency.
• A good litigation service via a reputable firm of Solicitors when necessary.

In addition, you should expect to receive:

• Maximum results from collection action.
• The speedy resolution of customer complaints via effective liaison with your company.
• A sympathetic and conciliatory approach toward honest defaulters.

The latter point is, of course, extremely important. As I think I have said many times before - bad times tend to get better, and memories tend to be very long, and it's therefore as well to remember that today's 'honestly defaulting company' may well turn out to be as good a customer in the future as it was in the past.

The safest way to go is therefore to use collection agencies judiciously if you are going to use them at all. Will the best will in the world, the very best of agencies could never know or understand your customers as well as you do, and could not evaluate long-standing relationships as well as you could yourself.

Even If You Think You Have Found a Jewel...

… and the collection agency has all the right credentials (including, of course, a Consumer Credit Licence!) you still need to make sure that the agency and its collection methods are right for your company - and that its personnel are right for you. You are going to be liaising with those people regularly, and that isn’t going to work well if you rub each other up the wrong way from the get-go.

Before you make a final decision, arrange to visit the agency's premises and meet everyone – more than once if possible. During your visits ask about working methods and principles – and watch and listen carefully to what’s going on around you. Make a point of asking which Solicitors the agency uses for litigation purposes – and check later to find out whether those Solicitors specialise in debt collection and have a good reputation in the field.

At that point, of course, you might want to approach those Solicitors direct, and go through the same process with them - visit, and find out about the people and what the firm has to offer. After that, of course, you'll be in a good position to compare people, services and prices, and make an informed decision as to who and what will serve you best.

How do You Find a Jewel in a Tarnished Crown?

Personal recommendation obviously means a lot when you need to find a good debt collection agency – and that’s particularly the case if the recommending party has been using the agency for some time, because some agencies begin well, perform brilliantly for six months or so, and then ‘go off’ as it were. Fortunately, that doesn’t happen too often these days: the collection business was always very competitive, and the ‘crunch’ has ensured that poor performance isn’t an option.

In the absence of personal recommendation, it’s worth noting that reputatable agents tend to be members of the CCTA and/or the Credit Services Association (CSA). In most cases any member of the CSA will have been vetted, might have sat a written or taken an oral examination, and would have agreed to abide by the Association’s Code of Practice, which is endorsed by the Office of Fair Trading. In addition, such an agent would usually have to have been in business for some time, and would need to give an annual assurance of solvency.

Some agencies are moving toward providing greater support of credit control teams at an earlier stage in the collection process - intervening before an overdue payment has actually become 'a debt', helping with pre-due calls, and checking invoice details at busy times of the year - and it will be interesting to see where that goes.

In the meantime, if you want to use an agent, getting a list from the CSA would be a good place to start.

Collection Agencies Have a Couple of Difficult Hills to Climb

Collection agencies can be very useful in some circumstances and the credit industry does, on the whole, recognise that fact. However, there is no doubt that debt collection agencies have a long-standing and difficult reputation to live down - and recent adverse publicity relating to consumer collections hasn't helped at all, despite the fact that quite a lot of consumer debt is taken care of 'in-house' by, for example, banking organisations, rather than regular (and more strictly regulated!)collection agencies.

Quite apart from that, of course, some credit managers prefer to use a firm of Solicitors rather than a debt collection agency.

One theory being punted about at the moment is that collection agency personnel are better trained to deal with debt collection than Solicitors are - that they have more appropriate telephone and negotiating skills, are better equipped to trace defaulters, and can arrange 'doorstep collection'. I personally don't agree that that is the case. Solicitors specialising in debt collection have all the appropriate skills and all the appropriate computer software to do an excellent job - and they don't have a 'difficult reputation' to overcome. Furthermore, collections sent to agencies very often end up with Solicitors in any event - which often means that, effectively, the client pays more than he might have done had he gone to a Solicitor in the first instance.

Third Party Collection

I'm afraid 'tomorrow' has been a long time coming on this one! I had to go to London - and then I had to get back, which is not always quite as easy as it looks on paper. And, of course, having got back, I found a pile of paper!

Getting back to using debt collection agencies - using a third party can, of course, be a very powerful psychological tool. A lot of defaulting debtors don't like the idea that a third party will be aware of the state of their account and believe - quite rightly these days - that it could adversely affect their credit rating.

The downside is that using an agency to deal with defaulting debtors means that you can lose control over those accounts unless you set up a foolproof system of liaison between the agency and your own credit control department.

And, of course, you need to carefully vet any agency with whom you propose to do business.