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Local authorities are responsible for collecting a substantial amount of money from two principal areas, namely: council tax, rates and rent; and sundry debtors.
This latter group may comprise as much as 10 percent of a council's revenue and can be a turnover of tens of millions of pounds and bigger than many companies. However, in many cases it may not focus on the collection of that debt to the same degree as even a small business.
A number of local authorities are pilot authorities for "best value" and within this is the requirement to improve on the collection of sundry debtors. Some authorities have asked for advice and guidance in the management of sundry debtors. Recently I presented a series of successful seminars based upon the knowledge gained in providing credit management consultancy to a number of authorities and the recommendations made and implemented form the basis of this article.
The Audit Commission has made a number of very sound recommendations in its management handbook Counting Down to Competition - A Management Handbook on Financial Support Services. Section 3, Chapter 5 deals specifically with sundry debtors and some of its main recommendations include:
(i) Having a clear policy framework (section 3.137);
(ii) Not issuing an invoice where a sensible alternative exists (section 3.134);
(iii) Setting minimum invoice values (section 3.134);
(iv) Application of telephone collection (section 3.158);
(v) Adopt a more vigorous commercial approach to debt collection (section 3.137);
(vi) Full scale recovery action right through to court proceedings should be taken (section 3.142);
(vii) Monitor performance (section 3.145);
(viii) Encouraging regular users to pay by direct debit (section 3.134);
(ix) Sparing in the use of qualified legal staff (section 3.156);
(x) Not crediting service departments with the income from invoices until payment has been received (section 3.144).
Much of this article supports these comments but develops concepts of best practice.
The more efficient collection of sundry debtors has now become more critical. The introduction of statutory right to interest on the 1 November 1998 means that local authorities must pay small suppliers within agreed credit terms or pay interest at the rate of 8 percent above base rate calculated daily. (In the absence of agreed terms a default credit period of 30 days...