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Policy & Compliance
www.bifa.org
Cash flow payment proposals
The European Freight Trades Association (EFTA) has supplied another article this month. EFTA is the leading credit forum for UK and Irish-based logistics companies and many BIFA Members are EFTA members
With companies possibly facing cash flow issues due to the worsening economic climate, it may be that payment of a sum owed is delayed for an unacceptably long time causing you to stop/withdraw credit and seek repayment. In such circumstances, some debtor companies hold their hands up and say something along the lines of “we can’t pay at the moment, but we want to offer a payment proposal”. Whilst this is far from ideal, it is occasionally a better option than demanding immediate full payment, not getting it, instigating some sort of recovery/legal action and applying so much pressure that the debtor company collapses and you get nothing. A case of ‘you can’t have what they have not got’. Every situation needs to be treated on its individual merits. Quite often these agreements can be fairly loose, consisting of a brief exchange of emails. EFTA suggests that after establishing the best monthly sum that can be paid, an immediate first payment is insisted upon. Remember that BIFA Members have an acceleration clause in the BIFA Standard Trading Conditions (STC) and in the event of any default in payment you reserve the right to demand immediate full payment of the outstanding balance owed at the time, together with statutory late payment interest and statutory debt recovery compensation costs from when the entire debt first fell due. You might offer that, in return for strict adherence to the payment proposal, you will waive your entitlement to claim statutory late
payment interest and statutory debt collection compensation costs as this introduces a financial incentive for the debtor to make payment on time. ‘On account’ calculations State that all ‘on account’ payments will be allocated against the oldest outstanding invoices at the time. In the event of a default, and you going for statutory late payment interest, it will help you correctly calculate what that sum is and you do not want to give the errant debtor the chance to debate what invoices have or have not been paid by various ‘on account’ payments that might have been made. You should already have engaged your BIFA STC in contracts with the customer. Ensure this is again brought to their attention and you have
acknowledgment that the payment plan is covered by the BIFA STC as having been read and accepted. Once the above has been achieved, every time you receive a payment send a brief email along the lines of “We acknowledge receipt of, and thank you for, your ‘on account’ payment of (state the amount). The remaining balance is (state the amount) and your next payment is due on or before close of business on (state the next payment date). Thank you in anticipation of receipt of the above sum in a timely fashion.” Politeness can help and it does no harm to remind the debtor company when it is next expected to make a payment. For more information about EFTA visit www.eftaweb.com
14
October 2022
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