The Bribery Act July 2011

Posted on June 22, 2011 by bill

The Serious Fraud Office (SFO) has published detailed guidance setting out the approach they intend to take to prosecution of offences under the Bribery Act 2010. In addition, the Ministry of Justice has issued guidance on the procedures which organisations should put into place to prevent bribery.

The Act is set to come into force on 1 July 2011 and will significantly reform the law of bribery in the UK. Crucially, the Act also creates a new offence for any commercial organisation failing to prevent bribes being paid on its behalf. The only defence to this charge is to have “adequate procedures” in place to prevent bribery.

The SFO Guidance includes guidance on what constitutes “adequate procedures”, how organisations can effectively implement such procedures and how these will be assessed in the event of a prosecution. Ultimately, these questions will fall to be decided by the courts on a case by case basis, however, prosecutors will also consider the strength of such procedures while considering whether there are sufficient prospects of success to justify prosecution. Interestingly, the guidance makes clear that the fact that one act of bribery has occurred does not automatically mean the procedures in place are not “adequate”, accepting that “the actions of an agent or an employee may be wilfully contrary to very robust corporate contractual requirements, instructions or guidance.”

Although this guidance sets out the Director of the Serious Fraud Office’s approach to prosecutions and is therefore not strictly applicable to Scotland, the guidance was drafted in discussion with the Lord Advocate. As such the guidance is likely to be indicative of the approach which will be taken in Scotland also.

We can assist your organisation in developing strategies for compliance in accordance with the new legislation and the guidance.

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What does the end of cheque guarantee cards and cheques mean for business?

Posted on June 20, 2011 by bill

On the 16th February 1659, towards the end of Oliver Cromwell’s Commonwealth period, the first cheque anyone knows about was issued. By 2019 (360 years later) we are likely to have seen the last!

The first step towards extinction of the cheque will be June this year with the end of the UK’s cheque guarantee card scheme. After 30th June, consumers will no longer be able to guarantee a cheque up to an amount (a maximum of £250) by handing over a plastic card, usually a debit card.

Although use of the guarantee scheme is in severe decline, an estimated four million people still regularly use guaranteed cheques, typically in shops and to pay bills and trades people. For those businesses that rely on the guarantee of payment (once the bank receives it, they have to pay it, subject to certain conditions), it will pose the question as to what alternatives will be in place to secure payments they wish to accept from customers.

As to the future of the “cheque” itself, the proactive movement towards the decline of the cheque will inevitably see the closure of the “cheque clearing system” by around 2018. Cheques hit their peak in 1990 and have been in sharp decline ever since with plastic easier to use in shops and some companies surcharging cheque payers.

An alternative paper based payment facility is a must for people such as the elderly or blind, however for everyone else it is likely that the next 5 year will see a major push towards using existing alternatives such as debit card and making internet and phone banking payments and emerging solutions. It won’t be long before a mobile phone handset can be used for paying for items by simply placing it against the cash till reader or paying your milkman by texting him!

Various internet and faster payment (bank to bank transfers) options are available, however the most obvious alternative is the acceptance of debit or credit cards via a card processing facility (merchant account) provided by one of the UK card acquirers. For those businesses already accepting card payments they have a readymade alternative, but for those new to accepting card payments there is one very important factor to consider and this is that you do not have to have a card processing facility with the bank who holds your business account. Accepting a “face to face” chip & pin card payment is guaranteed and other options are available for over the phone transactions and payment baskets for websites.

A merchant account provider will typically charge a set up fee in excess of £200 and you will then pay processing charges subject to a minimum monthly charge and the cost of a card machine. There is clearly a business decision to make as to the benefits of arranging a merchant account for accepting card payments, however there are additional benefits other than guaranteeing payment such as offering customers a wider choice of payment and also the ability to chase and take card payments on late or unpaid invoices. There are also many different ways of accepting card payment to suit your business, from Mobile GPRS terminals operated via a SIM card to wireless, desk top and virtual terminals accessed via your computer.

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Recovering Your Debts

Posted on December 1, 2010 by bill

Having debtors is part and parcel of business. Having debtors, who use your company as an unofficial line of credit, is increasingly becoming more prevalent.

Getting the debtors, who are in excess of their terms of payment, to pay their bills can be a difficult and time consuming activity.

In this article, I’ll lay out some of the options available to you.

Initially, soft contact options are best. After all, the debtor may have lost paperwork or been so busy that they may believe it has already been settled. Soft contact options should start with an email with attached statement, giving the amount now due. No need for excess detail or tough words, after all it’s a polite reminder.

If no response is received after 2 working days, make a phone call. The email will be so far down the debtors’ inbox after this time that they will not pay attention to it. So touch base with the person who placed the original order or the person who deals with the accounts payable. Again, this is a gentle reminder; give the amount owed and any purchase order reference that may be applicable. Offer assistance, invoice copies or even a call back at a more convenient time and follow up on these.

What you want to get from that phone call and what you want to drive them to is:

  • An amount they will pay
  • A date they will pay by

If there are obstacles getting in the way of this, remove them. Some typical examples are:

  • No invoice copy; email one straight away
  • Debtor awaiting cleared funds; get part payment or if not too distant a date agree a temporary extension to the due amount until that date
  • The person who signs cheques is not in the office until a future date; give your bank details and ask for a BACS transfer

The plus side of starting with the soft options is that you do not unduly upset your customer and you are more likely to get paid at this stage. The down side is that the soft option can take between 4 and 6 weeks to exhaust.

Always start soft and always offer assistance but do not remove the debt, offer discounts, offer credits or extend terms on a permanent basis. As these will only allow the debtor more assurance that they can continue to use you as a credit facility.

The trick is to firmly drive them to settling their debt but without them feeling threatened but with them feeling you are trying to help.

The next stage is less pleasant and may result in you losing the client but will have a better chance of getting the debt paid. You email / letter them and threaten to apply statutory interest and compensation.

Under the terms of the Late Payments of Commercial Debts (Interest) Act 1998, you are entitled to claim statutory interest and debt recovery compensation on the outstanding sum. Statutory interest is calculated at 8 per cent above the Bank of England reference rate, set on 30 June and 31 December, from the date the debt became due.

There is a sliding scale on the compensation charge you can levy and this depends upon the amount of debt owed. For example, if under £1,000.00 then the amount of compensation for debt recovery costs you can claim is £40.

However, before applying any charges, you should:

  • Consider the relationship with the customer
  • Get the opinion of customer-facing staff
  • Assess your credit management system
  • Find out the general industry practice

If you decide to apply the charge, you should notify the customer in writing. You should also send them a new invoice with the charge itemised as an additional amount and the outstanding total debt adjusted accordingly.

Purchasers cannot contract out of the late payment legislation, that is they cannot deny the supplier their statutory right to, for example, charge statutory interest.

If the debtor continues to avoid settling their debt, the next stage is a legal one.

A solicitor’s letter warning that you will consider issuing a county court claim can produce quick results. Solicitors charge a pre-arranged fee for this service. It is advisable to use a solicitor who is experienced in debt collection and court based collections.

This article has concentrated mostly on the non-legal options, as these are the ones you would have most control over and are the most likely to get results.

MBB Business Services has a wealth of business skills and expertise available to help you run your business and get on with those activities that generate your income.

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