Collections of unpaid invoices in the UK and Ireland An Atradius Collections Presentation for Forums International 16/03/2017 Business and Office Supplies
Who we are By presence in 25 countries, Atradius Collections a part of the Atradius Group, provides trade invoice collection services in 96% of countries worldwide to both Insured and Non-Insured clients. Its wide range of services assists companies around the globe to recover unpaid invoices, from first party to legal collections. Considering its global reach, local experience and seamless service, Atradius Collections possesses the unique expertise in achieving results. 2
Agenda Challenges Payments Practice Barometer - Ireland Payment Practice Barometer - UK Legal Framework Differences Retail Sector Trends - UK & Ireland Our Success - UK & Ireland Solutions 3
Challenges 1. Why are you experiencing problems? 2. Where are you experiencing problems? 3. What is your current process once an invoice is overdue? 4
Payments Practice Barometer - Ireland Global Collections review is an Annual survey commissioned by Atradius on a multi country, multi sector basis involving over 2,000 Credit Managers. It is aimed at understanding trends in the management of accounts receivable and the use of collections Document Title - Name - Function - Business Unit DD/MM/YYYY 5
Ireland Culture: Domestic debt is normally handled by negotiation rather than intense credit management pressure such as collection calls, threats of legal action etc. This culture needs to be taken into account. 54% of the value of domestic B2B sales, is transacted on credit terms. 31 days Average credit terms in Ireland DSO Ireland is 50 days, companies replying on longer credit terms. High costs of legal and delay in the system means delaying payments. 43.3% of the total value of domestic B2B invoices in Ireland remained unpaid after the due date. 64.7% reported that insufficient availability of funds is the most frequent reason for payment delays from domestic customers. Success rate is the main criteria for selecting a collections agency Main reason for NOT using a collection agency are cost and the risk of harming their customer relationships In house teams and law offices remain the main methods for dealing with overdue invoices 6
Payment Practice Barometer - UK Global Collections review is an Annual survey commissioned by Atradius on a multi country, multi sector basis involving over 2,000 Credit Managers. It is aimed at understanding trends in the management of accounts receivable and the use of collections Document Title - Name - Function - Business Unit DD/MM/YYYY 7
UK Culture : Domestic debt is normally handled by intense credit management pressure, business like and professional. This culture needs to be taken into account. 44.8% of domestic business-to-business (B2B) sales was transacted on credit terms. (Ireland 54%) Average credit terms in UK is 31 days DSO UK 54 days, companies taking longer to receive payment (Ireland 50 days) 44.6% of the total value of B2B receivables remaining unpaid past the due date. (Ireland 44.3%) 28.6% B2B receivables were uncollectable mainly because the customer could not be located. (Ireland insufficient funds) Success rate is the main criteria for selecting a collections agency Main reason for NOT using a collection agency are cost and the risk of harming their customer relationships In house teams and law offices remain the main methods for dealing with overdue invoices 8
Legal Framework Differences In order to issue proceedings the Ireland courts now require the following documentation Credit Application Form/ Signed Contract Up to date Statement of Account showing how the balance due is computed Invoices / Credit Notes Proof of Delivery Dockets Guarantee Demand/Call up letters Full disclosure/ copies of any correspondence between the parties prior to referral, pertaining to any possible contentious issues and or disputes which may or have arisen UK court does not set this level of obligations to begin action Ireland can take on average 6-12 months longer than the UK throughout the process Court Judgements are harder to enforce in Ireland Mediation is heavily pushed by the courts 9
Retail Sector Trends UK & Ireland Currency the weakening of the UK results in manufacturing becoming more expensive, so retailers are faced with either absorbing costs and their margins being impacted, or passing the costs on to the end customer, which is more likely, hence inflation is rising and sales may decline. New National Living Wage an increase in the minimum wage was implemented last year and as many UK retailers rely on lower paid staff, we would expect their costs to rise. Store Portfolios as costs rise and sales/margins fall, many retailers are faced with costly stores that are loss making yet lease contracts may be long, something which buyers may not be able to exit without filing for administration. Competition very strong in the sector amongst retailers in particular. We would expect those that are currently vulnerable to struggle quite significantly given the sector issues at the current time. 10
Almost 5.8bn worth of Debt Written off by UK SMEs alone in 2016 Interesting Fact - How much debt was written off last year by SMES? Small and medium sized businesses (SMEs) wrote off an average amount of 11,708 worth of debt last year. The research found that 76% of SMEs wrote off debt during 2016, totalling almost 5.8 billion collectively, approximately 134 million each day. 11
Our success from the cases placed with us for Collections Total Placed in Ireland 2016 9,366,224 Euros We collected in Ireland 51.14% Total Placed in UK 2016 59,901,093 Euros We collected in the UK 65.23% 12
Atradius Collections in UK & Ireland Operational Capacity Operational offices in Ireland and UK which understand the business and culture of both Client Experience Clients sign collections agreements with AC in client s country, no need to worry about legal issue in debtor s country No need to select or approach local collections agency, which sometimes may be difficult to communicate Simply speaking, clients entrust AC and we provide a onestop shop and a complete solution in collecting debts in the UK & Ireland
Our Customers 14
Atradius Collections B2B Credit Management Solutions Collect@net
Collect Letters One off fee per letter with no commission costs (discounts for regular and volume placements) Letters sent in the language of the debtor from our office closest to the debtor Communication and payment direct to your company Cost effective route to escalate and achieve payment on lower value debts otherwise written off. 16
Collect letters offers both insured and uninsured customers a route of escalation to achieve payment on overdue invoices where internal efforts have run heir course. They support the recovery of aged debt They provide a cost efficient option to chase lower values debts They reduce the resource required to chase lower value debts They help reduce the write offs on lower value debts They are available in 12 different languages and sent from our office closest to the debtor For a fixed fee per invoice Atradius Collections offers to: Provides a route for escalation through a globally recognised collection company Removes issues associated with language and location, increasing the concern for the debtor Reduces cost associated with collection for lower value and the number of write-offs Can be built into your internal dunning process to reduce extra expenditure on resource 17
First party collections For most companies accounts receivable management and administration is essential, but often not their core business It is often difficult to allocate operational time for an internal a reminder service just after due date of the invoice The internal reminder service is often unnoticed until something goes wrong and improvement is needed to provide added value again 18
First Party Collection delivered by Atradius Collections enables you to outsource your reminder service just after due date Using only trained personnel to ensure you a professional representation of your company Providing timely communication with your customer to allow you more time to focus on your core business Providing continuity of your internal collection services with regular reports of our performance Atradius Collections provides: Take over the complete reminder process Customise our process to streamline your collection process Monitor the delivery and efficiency of processes Register disputes and monitor payment plans 19
Example case handling amicable collections via collect@net 20
Third party collections No matter if you are operating locally or globally we offer an (international) debt collection service, enabling communications with debtors in local and export countries in order to induce payments and avoid losses Third Party Collections is Part of an Insured Policy with up to 100% cost contribution! (VAT is payable by the customer) On behalf of the customer we will contact the debtor and initiate the procedure of debt collection Providing a route for Escalation and removing barriers associated with Language, Time zone, Culture, Regulation, legal systems and internal resourcing 21
Third Party Collections is part of an insured policy with Atradius Credit Insurance and can provide up to 100% cost coverage (VAT is payable by the customer) Insured customer use a combination of Serve@Net and Collect@Net Atradius Collections provides you with an escalation route to recover overdue invoices in 96% of the worlds countries. Supporting you recover on overdue invoices Helping increase your cash flow Taking away the stress of chasing aged debtors so you can focus on your front end collections Support in reducing DSO, write offs whilst Supporting a streamlined internal credit management processes For a fixed Fee Atradius Collections provides Take over the complete collection process using local collectors Provide access to Collect@Net for monitoring collection activity Monitor incoming payments to ensure payback Provide collection advice following an amicable phase on next steps Solutions for our customers 12-01-2016 22
How do you get the best out of Amicable collections? We suggest at 60-90 days overdue is the point that you need to escalate to a third party. 23
Legal Collections As a result of non-payment in the amicable collection phase, AC offers customer to collect their outstanding invoices through legal collection On behalf of AC, a Legal Debt Collector (LDC) continues to induce payments via legal action Only offered to customers when the debtor has enough assets in order to effect execution once a verdict has been received Legal Collection costs are covered under insured policy up to 100% cost contribution when all policy terms have been abided by (VAT is payable by the customer) 24
Atradius Collections offers an international legal collection service, enabling you to follow up on unpaid invoices via our legal services. Legal representation available worldwide Costs provided upfront Regulation communication via our online portal Collect@NET Regular reporting Advise and communication through the process Covered under an insured policy when terms of the policy have been abided by (VAT is payable by the customer) Atradius Collections offers to: Take over the complete collection process Advice on legal collection strategies Monitor collection procedure & activity Monitor incoming payments to ensure payback 25
Insolvency Service A bankruptcy procedure is often a lengthy and cumbersome process This is particularly challenging for exporting companies who find themselves confronted with different legislative systems in those countries in which they operate Language issues and local procedures make it very difficult for individual businesses to recover any of their outstanding debts Covered under an insured policy when terms of the policy have been abided by (VAT is payable by the customer) 26
Atradius Collections offers an international insolvency service, enabling you to outsource the monitoring and recovery process when your customer has been declared bankrupt. For a fixed fee Atradius Collections offers to: Take over the complete process Lodge your claim Monitor insolvency procedures & liquidation Monitor dividend allocation 27
Debt Collection Handbook What can you find in our Handbook? The International Debt Collections Handbook is a key tool for businesses when it comes to making decisions concerning collections in foreign countries. Amicable Phase Legal Procedures Insolvency Proceedings Our Services available 28
Added value expertise, knowledge and resources made available Atradius Collections is part of the Atradius Group, which has 160 offices worldwide employing some of the best analysts, market experts, underwriters and economists. This enables us to share knowledge and data with our customers based on data gathered worldwide via millions of companies What this means is access to worldwide specialist in finance, debt collection and the general economy. With that customers have unlimited access to resources such as: Economic Outlook reports Specific country reports (to support future plans to increase coverage across Europe) Market insights data Payment Practices Barometer data Our International Debt Collection Handbook covering all stages of debt collections from amicable to legal for 40 countries Our people Atradius has been established for over 90 years and are a trusted partner to many Visit our website www.atradiuscollections.com for more information along with our group website www.atradius.com for further reports and market data 29
Security for our customers CSA membership in the UK FSA Licenced A.M Best is A (excellent) outlook stable A3 outlook stable by Moody s Dedicated Information Security function. The principles on which Atradius Information Security Management System are aligned to those of ISO27001. Similarly, the broader ITS framework within which Information Security reside aligns to the COBIT methodology. 30
Further Information If you would like further information please contact: Gina Delo Business Development Manager T: 029 20 824399 M: 7834 773481 E: gina.delo@atradius.com Atradius Collections 3 Harbour Drive Capital Waterside Cardiff Bay CF10 4WZ 31