Tools & Resources. A Guide to the Credit Management Service. How to get the most out of your Invoice Finance service

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1 Tools & Resources A Guide to the Credit Management Service How to get the most out of your Invoice Finance service

2 2 Introduction This guide is designed to help you understand the actions you should take and the information required to maximise the benefit from your credit management service with HSBC and to assist us when collecting monies from your customers. Our aim is to provide you with a professional, efficient, yet friendly credit management service.

3 Debt Turn Debt turn is an industry standard financial calculation that compares the value of a sales ledger (ie debtors) in relation to the value of sales on credit (ie turnover) over a given time period. The result is normally expressed as a number of days, and in essence reflects the average time your customers take to pay their invoices from the date you issue them. We view debt turn as the key performance measure for our credit management service, and will agree a target with you from the outset. The target will reflect the current performance achieved by your business and the improvement you wish to see, taking into account the credit terms you offer, and the reality of when customers pay. The debt turn target will provide a monthly cash collection target for the credit controller and the monthly results will be available on our Internet Invoice Finance (IIF) system, enabling you to monitor our performance. Invoicing and Collections Please ensure that all of your customer accounts are set up with the correct full company name, legal trading style, proprietor s name(s) where appropriate, correct address, post code and a landline telephone number. (See Setting up Customer Accounts and Requesting Limits.) The correct address will ensure that our letters and statements are sent to the correct place, which in turn will assist us in obtaining payment as promptly as possible. An accurate landline telephone number will ensure we can telephone the correct person. Top Customer We recognise that your largest customer is very important with payments from them being an essential ingredient in maintaining and improving your cash flow. To that end, your largest customer (by balance outstanding) will be reviewed and contacted each month to ensure that payment will be made for any overdue balance. At the same time we will also verify that other invoices notified to us have been processed and approved. This will avoid any unnecessary delay for what should normally be the largest payment. When invoices are notified to us, please note that the original should already have been issued to your customer. A range of these invoices may be selected by us for telephone contact to confirm receipt of the invoice and goods or services. Where your customers are overseas, due to time zone differences, it may be necessary for us to use s to confirm receipt of goods or services. Prior to receipt of confirmation from your customer of invoices that are selected in this process, these invoices will not be eligible for pre-payment. From experience, this method helps us to ascertain any reason for non-payment by your customer at an early stage. We will use a combination of letters, faxes, s and telephone calls (excluding accounts with a balance under 500 in the Invoice Finance for Smaller Business segment) in conjunction with monthly statements to promptly, but politely collect debts. Our letters will be issued at a set period past the invoice due date, aligned with your terms of trade and the agreed debt turn target.

4 Understanding and getting the most from our service It is important that you log onto IIF daily to read and respond to our messages and any queries or disputes on customer invoices. (See IIF Overview.) We will read and respond to all messages received by the next working day. Typical customer queries will include: Payments sent directly to you Price queries Delivery discrepancies/non-delivery When we generate a query notice, you have two working days to resolve the issue. It is essential that you endeavour to resolve these queries daily as after this two-day period, any unresolved query will be treated as a dispute which in turn will: Reduce your availability Mean that any previously protected debts will become unprotected Probably mean that payment of other invoices will be delayed by your customer If a disputed item remains unresolved for 60 days, we will normally re-assign this back to you for your own collection. To ensure we can collect payments quickly and allocate them accurately on the day we receive them we ask that you: raise invoices and credit notes promptly and accurately sending copies to both your customer and us ensure you both produce and retain all proof of debt documentation (eg copy orders, invoices, delivery notes, bill of lading or airway bill), in case they are required to help us or our solicitors collect payment for your invoices. There will be occasions when your credit controller will request this information to assist their collections, primarily when the debt becomes more than 60 days overdue for payment. A named credit controller will be assigned to your sales ledger with the aim of collecting debts effectively while preserving your customer relationships. Our experience has taught us that in order to maximise our collections potential for you, we should contact your customers during the peak hours of the day. For domestic (UK) customers we consider these times to be 10am to noon and 2pm to 4pm. For international customers, time zones will need to be taken into consideration. There may be times throughout the day when you are unable to get in touch with your nominated credit controller by telephone. All credit controllers are trained to the same high standard and therefore any one of them will be able to help you with your day to day enquiries. All material queries or disputes with goods or services raised by your customer that are likely to prevent or delay payment must be advised to us promptly. This will ensure we are aware of the problems and can work with you to resolve them. Please encourage your customers to send payments to us, in the correct currency and to quote their customer reference number on all correspondence. This will enable our payments administration team to allocate your customers payments against your invoices both promptly and accurately. Any payments that you have received directly from your customers should not be banked to your account; these payments must be sent on to us. This includes cheques made payable to you which we are able to bank under our Power of Attorney. If you receive customer payments by cheque, please attach a Forwarding of Payments Received Direct Header to your customer s payment and send to us in Worthing. If an account remains unpaid without good reason past 60 days from due date, or we have reason to believe that the customer has cashflow difficulties, we will always review and will normally remove the credit limit. You will receive a message on IIF to notify you of any removal of credit limit.

5 We aim to have all customer debts paid, or with our solicitors before they reach 120 days past due date (for seriously overdue export debts, we use international collection agencies to help us with the recovery). Debts that are 120 days past due date, that are with our solicitors and are not disputed will qualify for a credit protection payment, if you are using our credit protection service. This doesn t apply to debts in existence at the commencement date of your Agreement with us. If you do not use our credit protection service, customer debts will no longer be funded at 60 days past due date. You will receive a full update call from your credit controller every month. (Every 60 days for our Invoice Finance for Smaller Businesses Service.) We will use a range of contact methods to keep you updated on an ongoing basis: written correspondence; messages through IIF and telephone calls. What if a customer doesn t pay? There might be instances where one of your customers is either unwilling or unable to make payment for their invoices. If payment is still not forthcoming upon conclusion of our normal cycle of letters, statements and telephone calls to your customer, we will make an escalated call. This call will advise the customer that they have 5 working days to make payment to us. Failure to do so will involve us instructing our solicitors to collect the debt. If payment is still not received once the deadline we have set the customer has passed, we will send a message to you via IIF to advise you of our intentions to send a solicitor s letter. If you believe there may be a reason why we should not proceed, please respond to this message within 48 hours. If we don t hear from you, we will proceed by issuing a solicitor s letter to your customer. The solicitor s letter is sent in the name of DG Solicitors making it clear that we have instructed them to commence legal proceedings unless full payment is made. It informs your customer that further costs and interest will be added if payment is not received. It will also make clear that legal proceedings will be issued without further notice in the absence of payment or satisfactory proposals. For customers based overseas, we have the ability to send a solicitor s letter in a variety of foreign languages this letter is usually faxed through to avoid delays in transit. Legal action If there is no satisfactory response to the solicitor s letter, we will inform you once again via IIF that legal action will follow to recover the debt. If you instruct us that you do not wish legal action to commence then the debt is likely to be no longer credit protected. Ordinarily, the debt would then be reassigned to you for you to resume your own collections activity. For information about the remainder of the litigation process, handled by DG Solicitors, please read the guide to Understanding the Legal Process. The guide itself is broken down into the following subsections: Dispute Resolution Team Key stages in dispute resolution Disputed debts Defendant cases Allocation Cost of Litigation Costs of DG Solicitors Communication Dispute Resolution Flow Chart International Litigation Management of your cashflow The government, in conjunction with the Institute of Credit Management, has produced a series of user friendly guides to help our customers manage their cashflow. Please click on the link below to access these helpful and informative guides.

6 hsbc.co.uk Issued by HSBC Invoice Finance (UK) Ltd We are a principal member of the HSBC Group, one of the world s largest banking and financial services organisations. HSBC has around 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. HSBC Invoice Finance (UK) Ltd 21 Farncombe Road Worthing West Sussex BN11 2BW D /09 Designed and produced by DPS Corporate Design Group, Xerox (UK) Limited, London HSBC Bank plc All Rights Reserved.