A new tech start-up hopes naming and shaming late payers can help cure Britain’s small business debt recovery epidemic.
Chris Hawthorn started the PACT (please abide contract terms) scheme after his property marketing business buckled under the weight of late payment.
“I was deeply affected by late payments and non-payments. It’s not just about the money. It’s the ancillary effects: it’s the loss of productivity due to time spent chasing debts. I couldn’t attend exhibitions or hire new people,” he said.
To join the PACT scheme, a business pays a monthly £10 pound fee. The member business is then allowed to use PACT’s branding on its website and invoices. The initial aim is for PACT to act as a preventative measure. But once the debt becomes problematic, PACT helps stiffen a small business’s debt recovery muscle.
“There exists a no-man’s land between it being a late payment, and eventually becoming a non-payment,” said Hawthorn. “It’s crucial to act in that time. You don’t want to destroy the relationship - but you have to draw a line in the sand.”
If a creditor’s own steps at debt recovery have been frustrated, they can then upload the debt and the invoice onto the PACT database. “The system then sends three emails automatically over a period of seven days. The first would say: ‘You’ve got a debt registered and you have seven days to pay this debt. Failure to do so will incur the following repercussions.’ And then they’ll receive one after three days and one after six days,” Hawthorn explained.
The creditor decides when to enforce heavier measures. “It’s a click of one button on your customer dashboard and the debt will then be shared with all the credit reference agencies and shared on Defaulter.com.”
Defaulter.com is a fully searchable database of bad debt. The site is open for anyone to use. “Mediation will be in place as the first port of call to try to recover debt, while businesses which continue to refuse payment will be named and shamed on Defaulter.”