In December 1993, a survey carried out by Wansbroughs Willey Hargrave revealed that small to medium-sized companies viewed late payment of debts as less of a problem than in the late 1980s. Respondents cited two reasons for the improvement: their own tighter debt recovery procedures and their use of a professional debt recovery service.
However, further questioning revealed the true extent of this “minor” problem; 38 per cent were still having to wait up to eight weeks for payment.
When asked about likely changes, 28 per cent of respondents felt the situation would improve but the majority, at 64 per cent, thought it was unlikely to get better during 1994.
Since that survey there have been identifiable changes. In our experience, companies are now much stricter about giving credit. They have continued to improve their in-house credit control procedures and, with the change in County Court rules, are increasingly handling their own collections. Where they need professional help is with the higher value, more complex collections.
Wansbroughs recently upgraded its debt recovery system. Previously it used the U-Support debt recovery system designed by Edinburgh-based legal software company Usher Systems.
The firm has now invested in new hardware and software. For the hardware, it bought a Sun Sparc System 20, the main function of which is to run the firm's accounts and litigation support systems.
It also runs a new debt recovery software package purchased from Linetime.
The new system, which went live in March 1995, is quick and user-friendly.
The instructions arrive from clients usually on floppy disk or by letter. Once the information has been downloaded, statutory demands, High and County Court writs, insolvency, winding up and bankruptcy petitions are automatically generated.
Status reports can be produced in the format that clients require and as frequently as they wish.
The package includes a diary system, with built-in reminders of when judgments are due, and an instalment monitoring device which identifies when payments are due or have not been received.
The system is also accessed by other branches of Wansbroughs' offices to recover uninsured losses for its insurance clients.
The pressure on premium income and the increase in the number and cost of motor claims, in particular, is making insurers more concerned than ever to recover their payments to policyholders from third parties responsible for collision damage.
For this type of work, instructions are received on disk and follow an in-house pro-forma instruction sheet. The instructions are loaded onto the system and actions started within a few hours.
The firm also accesses the debt recovery system in its Leeds office, using the integrated wide area network which links all offices.
In December 1994, the firm opened an office in Winchester and in February 1995 one in Sheffield, when the firm was joined by two teams of health sector partners.
Health sector clients are facing increasing debt collection problems ranging from bad debts with suppliers and private patients, to outstanding payments on loans, overpayments of salaries and non-payment of bills for rented accommodation by staff.
To complement the computerised debt recovery system, the firm offers its clients a range of support services including arrangements with a network of process servers and bailiffs.
The firm is also able to obtain garnishee orders on a debtor's bank or building society account, make a charge on their property, issue an attachment of earnings or apply for an oral examination.
In extreme cases, a licensed insolvency practitioner can advise clients on the strategy for issuing bankruptcy proceedings or winding up orders, as well as representing clients at creditor's meetings.
On the preventative side, the firm's commercial and litigation lawyers also provide support in drafting terms and conditions of trading, and advising on retention of title recoveries.
In conclusion, clients are well aware of the basic need for stringent and prompt credit control procedures. The nature of our work now means that debt recovery practitioners are increasingly used by clients as an extension of their own credit control department.
Tony Brown is head of debt recovery at Wansbroughs Willey Hargrave, Bristol.