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How To Collect Late Payments

  • Young businesses need cash and good credit control is an essential management tool. Try and get payments in advance, letters of credit or cash on delivery but if you must give credit to customers here is some advice.
  • Get your customers to pay on time by talking to the regularly and building a good relationship.
  • Make sure you have an agreement on how long the credit period will last and how payment will be made. The agreement can be verbal but it should preferably be in writing. Where there is neither an agreement in place nor industry custom and practice the law sets a default period of 30 days.
  • Use the method called BEBO this means bill early and bill often – do not let things drift.

Charging interest on late payments
  • If some customers still end up paying late you have rights under the late payment legislation to charge interest and debt recovery costs.
  • Purchasers cannot contract out of the late payment legislation - ie they cannot deny the supplier their statutory right to, for example, charge statutory interest.
  • If you indicate in your terms and conditions that you will charge interest on all late payments, it is up to you whether you actually do so or not. You should address each debt on a case-by-case basis.
  • With persistent offenders, you may need to start charging interest to act as a deterrent in the future.
  • Make sure invoices include an agreed payment date so customers know when interest will start being charged - let customers know if interest starts to accumulate.
  • Before charging interest, you could issue a letter stating that the payment is late and if it is not paid within, say, seven days, interest will be charged.
  • Present the customer with a final receipt once the interest and the original sum have been paid, outlining details of interest charged.
  • As well as charging interest you can also claim costs for the recovery of late payments.
The costs, which are fixed, are as follows:

Amount of the debt - Debt recovery cost you can charge
  • Up to £999.99 - £40
  • £1,000 - £9,999.99 - £70
  • £10,000 or more - £100
However, before applying the charge, you should consider the relationship with the customer find out the general industry practice.

Taking further action to collect debts
  • Before you take court action, you should consider the alternative methods of recovering debt, negotiation, mediation, conciliation or arbitration.
  • You should continue trying to recover the debt using the usual methods, eg telephoning the debtor to remind them that the payment is now overdue. Another alternative is to use a debt collection agency or send a solicitors letter.
  • The advantages of using an agency are they have the time, expertise and resources needed for the job. It can be a fast method of recovering debts so will save you time.
  • The disadvantages are that an agency can be costly - the commission on the money recovered is typically 8 to 10 per cent for commercial debts, you may lose the customer and if the agency is heavy-handed, your reputation may be damaged
  • A further alternative is for you or your debt collection agency or solicitor to issue a statutory demand, promising an application to court for the formal winding up of the customer's business if payment is not made within 21 days.
Taking court action to collect debts
  • Taking legal action to recover your money should be a last resort.
  • If court action still seems the best solution, consider whether making a claim is cost-effective. It might be cheaper to write off small sums. If a customer is likely to place large orders in future, it may be better to let things lie if only a relatively minor amount is in dispute.
  • If you decide to take court action, make sure you have resolved any disputes over the goods or services you have provided. If you don't do this, the debt will be difficult to recover. You also need to make sure that customers have the means to settle. If they are bankrupt or in liquidation, your debt is probably irrecoverable.
  • Debts of up to £5,000
  • Debts of up to £5,000 are dealt with by the small claims track at your local county court. This offers a quick and inexpensive way of making claims for unpaid debts, as you don't have to employ a solicitor.
  • In Scotland, claims are dealt with by the Sheriff Court.
Debts over £5,000

Claims from £5,000 to £25,000 must be issued in a county court, while claims of more than £25,000 can be issued in the High Court. It's advisable to get legal advice about this.

First Time Buyer in 2010

If you are planning the purchase of your first home this year then you need to consider some key areas.

The Right Deposit - You need the best deposit you can arrange to get the best deal.

The minimum deposit is likely to remain at 10% for the rest of 2010 and the 100% mortgage is not likely to be offered by major lenders for sometime.

The bigger your deposit the better the interest rate and overall deal is going to be. 15%, 25% and 40% are threshold levels beyond which the rates get better so a 22% deposit is treated as a 15% deposit so try go the extra mile and save to the next threshold.

Your credit score is still important and just having 10% deposit is no guarantee of a mortgage if your score isn’t good enough.

Use a Broker - If you are uncertain it may pay you to consult a mortgage broker.

Brokers should survey the whole market and match your circumstances to an appropriate mortgage deal.

Brokers should ensure you don’t forget how costly a mortgage can be.

Costs of Property Purchase. - Stamp duty is now back to 1% on prices £125,000 - £250,000, 3% if the purchase price is above that and 4% for those paying over £500,000.

Legal fees, survey costs and arrangement fees all mount up. It is easier to forget a cost than to over budget so have some contingency available.

Look at the whole package of costs as arrangement fees now or after any initial ‘special offer’ can bump up the effective interest rate and take a lump of savings to sort.

Other Considerations

Not every bank will want to lend to you. Do not take it personally it is just business to them. If you are rejected try understand the reasons and where possible put them right for the next application. If it is the property value that is rejected may be someone is trying to tell you something.

Interest rates may vary, probably upwards at some stage this year and the longer you are fixed for the greater vision you will have about your outgoings.

The trend on rented property costs is not likely to be upward this year but supply and demand area by area may influence your buy or rent decision. In any case think things through as it is your home you are considering buying.

More Tips for first time buyers

Credit Rating and Ex Partners

Is Your Credit Damaged by Your Ex?

Your former spouse or partner can have an impact on your current finance and here we will give you some tips to cut your financial ties. Applying jointly for credit to buy a car, negotiate a mortgage or having a joint bank account means you are linked in the eyes of credit reference agencies. If the other person then has financial difficulties you can suffer long term.

Credit references should be related to individuals not addresses but be wary.

Control Debts with your Ex

  • Talk openly about finance matters when you are together. Keep records
  • If you make any joint applications even if they are not taken up you will be linked to the other person. What is relevant is whose name is on the agreement, as this is the person who will be legally liable for the debt. If it is in joint names you both have 'joint and several liability' and both can be chased for the full amount.
  • Check your credit report with the main agencies, Experian, Equifax or CreditExpert, it costs a couple of pounds. Make a note of any details that are in joint names.
  • Settle any joint debts when you split. Then close the account and contact the lender to get them to update their records.
  • Tell utility providers, credit agencies and any other relationships with joint accounts that you have split up and that all joint accounts are now closed.
  • Notice of Disassociation can be placed on your credit file when for some reason a link ‘previously’ existed between you and another person but they do not cover previous debt issues, you need proof that the association has finished and thee ultimate decision is in the hands of the Credit Reference Agency.
  • Confirm for yourself that you have not given any guarantees on behalf of your partner or their debts. If you have you will need to negotiate an exit from the guarantee with your Ex and any lenders.
Other Potential Problems

  • Even well after the split keep monitoring your credit report to catch any lingering or resurfacing problems. Do this at least annually
  • Divorcees are not necessarily clear of former partner's debts. Any assets awarded as part of the divorce can be reviewed for up to 5 years after the divorce if one of them is declared bankrupt. So seek legal advice in these circumstances.
  • Whilst living together a partner may grow an equity value by contributing to the costs of a mortgage for example. In those circumstances a creditor could claim part of the asset you thought was yours.

Financial Scams To Be Careful Of

There are many ways companies can get us to part with our hard earned cash. Be wary of these following practices which can lose you money.

Loan Protection Payments.

Banks often sell very expensive loan insurance schemes. You can end up paying 50% of the cost in insurance premiums. Often banks give the impression these very profitable insurance schemes are essential to get the loan. Be very wary, if you really want loan payment protection, it may be better to get some from another company.
See: Misselling of loan insurance protection

Bank Details

Though oft repeated, always be wary of any email that tries to get your login details to your bank account. Scammers can give the impression they are your bank when actually they aren't

Internet payment of Subscriptions by card.

Recurring payments like magazine subscriptions, annual trip insurance, gym memberships etc are not covered by the save guards on debit cards or credit cards. even if you tell your bank to stop payment they wont! The supplier will have your full long security number and can take payment at will. It is then up to you to dispute or fight for refunds or cancellations.
The direct debit scheme has safe guards and you should try insisting that is the way you wish to pay.
An alternative is to use a prepaid credit card which won't pay out if there are no funds (but beware this may mean you are in breach of contract)

Door Stop Energy Salesmen

Paying monthly is a common way of getting energy bills settled. A guesstimate of consumption is made and converted into a monthly cost. When someone calls at the door with the sales patter offering £10 per month or more saving if doesn't mean they are cheaper.
Compare the unit costs - use a reputable web site for a guide to cost comparisons. If you do sign up you have 14 days to cancel so use the time to double check.
Once the deal is done unscrupulous suppliers are trying to increase the monthly payments immediately and by 30% in some instances! At best, this is to help their cash flow and at worst it is because they know you need to pay more.

A Good Time To Remortgage

There are three good reasons to look to remortgage your property.

1. If you want to take advantage of new interest rates or your old deal is coming to an end.
2. When you need to increase your loan to pay for improvements, extensiond or serious repairs.
3. When you want to change the terms of your mortgage by extending the repayment timeframe or adding another person to the mortgage for example.

Watch out for these issues when Remortgaging

• Costs of exiting your old deal plus the one off costs of the remortgage can be very expensive.
• Can you get the same benefits from your current mortgage by negotiated variations. Try and talk to the company you are with
• Beware hidden conditions that come into play in 2-4 years time such as nnew interest rates.
• Do not do anything you are uncomfortable with, chew over the offer and look gift horses in the mouth.

Is a second mortgage the same as remortgaging?

• No they vary so ask your provider to explain all the issues – they are paid to be experts so use their knowhow for your purposes.

Is a remortgage a special kind of mortgage?

• Not really you are getting a new mortgage if you swap providers and they will go through the normal issues and paperwork.
• If you are staying with the same provider then technically you are remortgaging ie swapping the terms of one mortgage for the terms of a new mortgage.

How Long WIll Interest Rates stay at 0%?

source: BBC

Interest rates could stay close to 0% for a long time, if the recession continues to worse and unemployment rises. The latest inflation forecast suggested CPI inflation will fall below the government's target and stay around 1%. Since this rate is below the governments target this will keep interest rates low.

However, despite the magnitude of the recession, government policies mean inflation could return in a couple of months. If it did interest rates would rise.

Inflationary policies include
  • Large depreciation in the Pound
  • QUantitative easing (increasing money supply)
  • Budget deficit of 12% of GDP
See also: Interest Rate predictions

95% Mortgages

Nationwide are the first major building society to bring back a 95% mortgage. This may be helpful for first time buyers who are struggling to get a deposit. However, the rate at 7.19% is far above the base rate of 2%. Also there are still expectations of falling house prices so that many who take a 95% mortgage could be left with negative equity - where the value of the house is less than the value of the outstanding mortgage.

Mortgage Interest Rates UK

The recent cut in base rates by the Bank of England, will be welcome news for the UK's homeowners. However, despite the large base rate cuts, there is no guarantee that homeowners will benefit from cheaper mortgages. Banks are trying hard to improve their profit margins and improve their balance sheets.

These are reasons why the base rate cut may not be passed on - Mortgage interest rate outlook

House price trends in the UK - point to future rate cuts

Tesco Mortgage Deals

Tesco's have announced an entry into the mortgage sector. Previously they have avoided entering the market because they felt it was too competitive and profit margins too low. However, with the increased concentration of the mortgage sector. (the Government is effectively the second biggest mortgage lender now) and merger of Lloyds TSB / HBOS.

At the moment, Tesco's offer just a mortgage comparison service (link). But, now they feel that selling mortgages to be a good business plan. The new mortgage provider will help prevent the market get too monopolistic.

Tesco's current financial sector - Tesco Personal Finance specialises in loans, and credit cards. Tesco is one of the UK's most profitable companies.

Credit Crunch News

The credit crunch continues to cause problems for finance markets and the wider economy.
Losses from mortgage defaults caused big insurance firm AIG to require a bailout. Lehman Brothers went bankrupt, after the Fed decided they weren't important enough to bail out.

The Credit Crunch continues to cause problems for the beleaguered housing market. House price transactions have fallen to their lowest level since 1959 (link). See: Effect of credit crunch on housing market

The deteriorating housing market at least increases the hope for an interest rate cut

Because of continuing problems with the mortgage market and the economic slowdown, house prices are likely to continue to fall in 2009. However, house prices could rebound in the late 2009 - When Will house prices recover

The Fed is proposing a $700bn bailout for bad debt in America. It is being intensely scrutinised with many questioning the nature and scope of the deal. - Questions about Bailout

Banks at Risk from Collapse

Another frentic day on the stockmarket saw more banks lined up as potential victims of the credit crunch.

After the collapse of Lehmanh Brothers and rescue of HBOS by Lloyds TSB, share prices in investment banks plummeted on fears that the credit crunch could soon be hitting them.

Amongst the big losers were Goldman Sachs and Morgan Stanley.

They lost 25% and 37% respectively. The FTSE closed at its lowest level for 3 years. at 4,900.

The US government, who bailed out Freddie Mac and Fannie Mae, pumped over $80billion of money into insurance firm AIG. They didn't rescue Lehman Brothers, but, are looking closely at the financial state of Morgan Stanley. They will not want to let Morgan Stanley go under, but, are aware of the acute crisis occuring in the financial sector. With confidence on a knife edge, they will be reluctant to see another bank go under.

UK Bank Profits Rise

Banks Make Profit Despite Credit Crunch.

Despite having to write off bad debts in an unprecedented large scale, British banks have proved adept at maintaining what they do best - making profit. British banks made £3.8billion profits in last 12 months.

The Banks have used the credit crunch as an opportunity to increase bank charges on credit cards, mortgages. The result is that underlying profitability has continued to rise.

For example, HSBC, posted a 28% drop in global profits in its latest results, yet its UK personal-banking division was up 85% to £605m. For example, Over the past 12 months HSBC has increased the cost of its two-year fix for borrowers with 25% equity in their home by half a percentage point, from 6.34% in July 2007 to 6.84% . This amounts to an extra £62 a month on a £200,000 loan, or £1,505 over the two-year period.

The Royal Bank of Scotland also increased its operating profits by 9% and said it found the UK mortgage industry increasingly attractive and was trying to increase its market share here.

Times article
Top 10 British Banks
Top British Banks and Building Societies | Price Comparison Site is one of the market's leading price comparison sites. By having access to many different suppliers they make it easier for customers to compare prices and find the cheapest deal. Money supermarket specialise in financial services such as mortgage deals, insurance quotes and loans. However, they also run price comparison services for other services such as mobile phones, travel, broadband and shopping. has been valued at over £1billion and has an estimated 35% of the market share.

If you are looking to save money on finance products, it is also worth considering these practical tips for saving money:

Mortgage Application Fees

Fees on fixed rate Mortgages have shot up in recent months. The cost of many fixed rate mortgage deals have increased by nearly 55%. Application fees on variable mortgages have increased, but, at a slower rate. Research by suggest that best-buy discounted rate mortgages only increased 11%.

The shorter the mortgage, the bigger application fees will be as a % of the total mortgage. If you have a small mortgage, which you hope to pay off quickly, avoid paying high application fees.

It also shows that when choosing a mortgage application fees can be as important as the basic interest rate for determining competitiveness.

Mortgage firms have been happy to increase application fees to ration mortgage lending. The market is becoming increasingly uncompetitive with potential lenders being in an unenviable position of facing high costs and difficulty in getting loans.

Check out a variety of mortgage lenders because often the biggest mortgage lenders are not the most competitive.

Fixed Rate Mortgages.

Fixed rate mortgages are also not great value because with impending economic downturn, interest rates are unlikely to rise.