Costs and bills in the UK have increased dramatically in recent months. For businesses, this is “the new normal” – and the impact is twofold. First, reduced liquidity has led to delayed payments to conserve funds. And second, we are seeing increased insolvencies in companies all over the country. Understanding the ins and outs of debt recovery proceedings can help businesses to manage and mitigate risk in this challenging environment.
Understanding debt recovery in the UK
The UK’s debt collection process begins when a client recognizes a non-payment and begins the pre-legal cycle. This is initiated with series of dunning letters, emails and telephone calls made to the buyer. Within the UK Collection team, we aim for a window that lasts a maximum of 30 days, which is shorter than in Italy, for instance, where it can last up to 60 days.
In collections, speed is vital; the faster you send a payment reminder, the faster you receive payment. Escalation and following up on late payments are key to making clear to the debtor that the collector means business. Once the window has passed for amicable repayment, the case is brought to court.
It is common in the UK for debt disputes to be settled without legal action. However, where it is necessary to proceed with court action, Allianz Trade is prepared to step in. The UK Policy Holder has 90 days past the due date to attempt to resolve the dispute themselves. However, it can be placed with us earlier. In this case, the UK Collections team take over all communications with the debtor and recommend that our client stops interacting with them. By acting like a buffer, we hope to prevent friction and preserve a positive relationship between the customer and the buyer for the future.
Top tips for UK firms
There are several strategies companies in the UK can take to protect themselves in the event of non-payment from their buyers.
Consider the retention of title clause
This contractual provision means that until payment has been received, the supplier still owns the goods. They can therefore request to have them back from the buyer who has defaulted on payment and thereby recoup some losses. Though this doesn’t work in every case—notably, for companies selling services, perishable goods or bespoke items - it can be helpful to companies selling mass-produced goods like railway sleepers or standard chairs, for example.
Develop strong credit control processes
Having procedures in place to stay on top of invoicing and payment will help cut out delays between non-payment and resolution. We’ve found that companies that are proactive with their buyers and follow up regularly, even before the invoice is due, are more likely to get paid. Businesses working with a third-party such as Allianz Trade may also find it helpful to inform buyers that they will outsource collection of that overdue debt. This makes it clear that non-payment could impact a debtor’s credit score down the road. The continued escalation within the whole dunning process from Credit Control to third-party Amicable Collections to Legal action is key.
Conduct due diligence
Much like in Italy, France, the US and APAC, thorough record keeping is a must to trace, verify and collect debt. Companies should also carefully vet buyers before entering into a contract with them. Ensure that they have an email address and phone number, that the company name checks out, and that what they are buying corresponds to their business needs. It may sound simple, but it’s an essential step that supports debt recovery.
Allianz Trade, an ally to UK businesses
At Allianz Trade, we are proud to be globally recognized for our expertise in debt recovery. Our strong reputation is an asset, as it can help a client approach a debtor with confidence that they will receive a timely response. We stand by our clients and can help escalate as needed and resolve debts amicably wherever possible.
Got questions? Connect with our experts
Bradley Court
Collections manager
Allianz Trade in the UK & Ireland
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