COMMERCIAL COLLECTIONS AUTHOR – Sean Feast FCI<strong>CM</strong> work, even though they have not been paid for the work they have already done!” The above example, Gavin says, refers more often to SME businesses suffering slow payment from larger companies who often, as a matter of policy, are simply starving their suppliers of much needed cashflow in order to preserve their own: “Morally it’s quite wrong,” he says, “but when you are being tied up in their internal bureaucracy, being forced to accept extended payment terms, then the real question you must ask yourself is ‘Does the customer take the unauthorised extended credit or does the client allow it?’” The commercial collections industry has previously been accused of operating in an ‘unregulated’ space though that is only partially true. Victoria Herd certainly doesn’t see the lack of a ‘single’ regulator akin to the old Office of Fair Trading as an issue: “Consumers are protected by regulation from the Financial Conduct Authority and they also have the Financial Ombudsmen where necessary,” she says. “We’ve seen huge strides in the industry over recent years around treating customers fairly and dealing with vulnerable customers too. The key thing for any business looking to partner with a debt collection agency is to do their research and ensure they are experienced, authorised by the FCA, have a proven track record and have the right affiliations and memberships, for instance with the Credit Services Association. Yvette Gray agrees: “Whilst commercial collections is not currently a regulated activity, we welcome some form of regulation as Atradius Collections is bound by the same high standards of Atradius UK, who are regulated by the FCA. Atradius Collections also adheres to the CSA code of practice which is the benchmark for the collections industry best practice.” PROTECTING CUSTOMERS Regulators, Gavin says, are fundamentally there to protect customers and clients from a DCA who is not abiding by much-needed code and rules: “I am here to make someone want to pay, not to make them pay by nefarious means. In turn what we are doing is providing essential help to our clients’ cashflow, keeping communications fluid and pinpointing problems sooner, before they become insolvable issues.” Karen Savage of Azzurro Law agrees and “We are not going to reinvent the collection wheel, what we do need to do is re-educate the business owner to recognise risk and have the correct procedures in place to manage them.’’ says lack of regulatory clarity is no excuse for poor practice: “It is wholly appropriate for collectors of commercial debts to exercise the same high standards of behaviours in the commercial space as they would if collecting a consumer debt, especially when it comes to providing forbearance and identifying those who may be genuinely vulnerable,” she says. “The line between commercial/consumer has become increasingly blurred over the years, especially when it comes to dealing with SMEs. The lack of any clear Code or single regulatory body for commercial collections is not ideal, but it should never be used as an excuse for poor practice.” In terms of the future, most in the industry appear agreed that insolvencies are likely to increase in the near term, and this will have a direct impact on the collections world: “Insolvency proceedings have been frozen during the pandemic, and these are therefore returning as effective options for the credit manager,” says Michael Higgins, but he hastens to remind the credit profession that the minimum debt size to justify a Winding Up petition has been substantially increased to £10,000 from 1 October <strong>2021</strong>, so other strategies may need to be considered for the smaller debts. Yvette says that while the last year has seen non-payment kept artificially low, the gradual withdrawal of Government support schemes is set to open the door for the long-predicted spike in insolvencies: “Atradius economists forecast UK insolvencies will increase 33 percent in 2022 compared to pre-pandemic levels, so it’s set to become more difficult to collect payments,” she says. “Therefore, a robust credit management operation is absolutely essential. Plan in advance, ensure resource issues don’t leave you exposed and, when something does go wrong, act fast. A swift escalation to a third party can make the difference in getting paid, so don’t leave yourself at the back of the queue.” Gavin concurs: “We are not going to reinvent the collection wheel,” he says. “What we do need to do is re-educate the business owner to recognise risk and have the correct procedures in place to manage them. A Credit Policy is no different to the reasons why there is always a police presence at football matches, not for us to feel guilty for doing something wrong when we haven’t, but to ensure we keep to the rules – or in our clients’ position – ‘terms of payment.’” Brave | Curious | Resilient / www.cicm.com / <strong>December</strong> <strong>2021</strong> / PAGE 14
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