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April Credit Management FAQ

April Credit Management FAQ

Our top credit management questions in April

Here are April’s top credit management questions that we have been asked by customers and contacts.

A customer has offered to pay £250 of a £500 debt in full and final settlement, what does this mean?

If your customer proposes to pay an amount in full and final settlement, and you accept that amount, you cannot pursue them for the remaining balance. However, if your customer makes a payment into your account and then follows this by stating the amount transferred is in full and final settlement, you can still pursue for the remainder as you had not agreed to the offer prior to it being transferred.

What interest can I charge on late payments?

The amount of interest you can charge on late payments depends upon what is in your T&Cs. If you have late payment interest stated in your terms then you must stick to it; if you don’t then you can rely on Late Payment Legislation, this allows you to charge 8% above the Bank of England reference rate, as well as compensation and third party debt recovery fees. If, however, the interest rate stated in your terms could be considered unreasonable, you may want to consider lowering this in line with Late Payment Legislation.

What should I include in an unpaid invoice email?

Emails to customers when chasing for payment should follow the same guidelines as letter cycles, they should start out very politely and customer focused and become firmer as the cycle progresses. You need to include details of previous conversations with your customer, the amount due and how far past the due date it is. I suggest your first email should say ‘when can we expect payment?’, with your later emails providing deadlines for when you expect payment.

What is retention of title?

A retention of title clause with terms and conditions means that you are still the legal owner of any goods provided to a customer until payment is received; should your customer fail to pay you for goods delivered, you are able to recover said goods. The clause should also incorporate the right for you to enter a customer’s premises to recover the goods.

This clause will only apply, however, if your customer is still in possession of the goods, they can be identified as yours, they can be traced to unpaid invoices (through stock numbers etc.) and that they have not been used within a manufacturing process (i.e. leather turned into handbags). If they can still be identified as your goods and can be easily removed (i.e. engine bolts in a vehicle) then retention of title will still apply.

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