Glossary of credit & collection terminology

Money owed to a company by its debtors.

A debt that cannot be recovered and is written off as a loss.

Someone authorised and instructed to collect a debt on behalf of the person who is owed it. There are different types of bailiffs who collect different types of debt, such as County Court Judgments, unpaid council tax, outstanding rent and so on.

Capital is more durable than money and is used to produce something and build wealth. Property rights give capital its value and allow it to generate revenues and build wealth. Equipment, machinery, patents, trademarks, brand names, buildings, and land are a few examples.

Cash flow relates to the receipt of money to cover outgoings. A “positive” cash flow means that enough income is being received to cover the outgoings, while a “negative” cash flow means that there isn’t enough coming in to cover the outgoings.

An executive agency within the Department for Business, Innovation & Skills with two main functions: 1. To incorporate, re-register and strike-off companies as well as registering documents required to be filed under companies, insolvency and related legislation. 2. To provide company information to the public, enforcing compliance with statutory requirements.

A person at the head of a company who supervises, regulates or controls its actions. Appointed by the company owner(s), a director has certain powers and duties relating to the management or administration of the company. Their powers are defined by the Articles of Association.

When a Limited company is formed, it is given a unique Company Number which it keeps until it is dissolved (even in the event of a name change). All companies are legally obligated to show this number on their letter headings.

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The County Courts have had jurisdiction to hear claims relating to company debt since 1991. There are three different procedures that are applicable, depending on the amount being claimed: 1. Small Claims track: debts up to £10,000 will be assigned here for a less formal hearing with help and guidance offered by the court. 2. Fast track: debts between £10,000 and £25,000 will result in a more formal hearing in the County Court. 3.The multi-track usually deals with very complicated cases with a value of £25,000 or more, but it also gives the court the ability to deal with cases in the most suitable way according to the needs of that case. This means that unlike the other tracks, there is no standard procedure for multi-track cases.

In England and Wales, County Court judgments are legal decisions handed down by the County Court. Judgments for monetary sums are entered on the statutory Register of Judgments, Orders and Fines, which is checked by credit reference agencies to assess the credit-worthiness of individuals.

The County Court will issue a certificate of satisfaction when the judgment has been paid in full. It is the payer’s responsibility to obtain the certificate of satisfaction.

CCJs are only cancelled if they were entered accidentally; if the debt was paid before it was entered; or if the judgment is paid within one calendar month of being entered. It is the payer’s responsibility to obtain cancellation for the judgment in these cases.

Credit is the power to obtain finance, goods or services on a basis of trust by promising to pay for them at a predetermined time in the future.

Credit Insurance is purchased to protect a business’s accounts receivable from loss due to credit risks, such as protracted default or insolvency.

A credit reference is the information returned as a result of an enquiry to a credit reference agency, with information compiled from electoral rolls, CCJ data and commercial enquiries.

Credit scoring is concerned with assessing the likelihood that credit will be repaid on time – the method used involves assigning a score to various attributes of a potential customer.

A company which operates an independent debt recovery service for accounts that become overdue.

The Scottish equivalent of a CCJ.

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A High Court enforcement officer is an officer of the High Court of England and Wales responsible for enforcing judgements of the High Court, often by seizing goods or repossessing property.

Insolvency is the state that a company or individual enters when they’re not able to pay their debts. When a business becomes insolvent, this means that its debts (liabilities) are greater than the value of its assets and income. In effect, they’re not able to pay back the money owed, either currently or in the future.

The recovery of outstanding invoices from debtors based in a country outside of the UK.

This Act was introduced as a means of encouraging customers to pay their debts on time, otherwise companies who are owed can charge statutory interest and costs.

Liquidation is the term used to describe the winding up of a company, usually because it has become unable to pay its debts. It involves the selling of the company’s assets and the division of any proceeds to the companies it owes money to.

Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered to customers who have ordered but not paid.

All limited companies must register with Companies House, who will make the company information publicly available on their website. This means companies must provide the details of who their shareholders and directors are, as well as file a copy of their annual financial accounts.

The address of the company which is recorded at Companies House and which all documents are sent to. It can be found by referring to company headed paper or by carrying out a company search.

Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity. Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term expansion and growth.

This refers to the right of companies who are owed late payments on commercial debts to charge interest on them under the Late Payment of Commercial Debts (Interest) Act 1998.

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Tracing refers to the use of a variety of techniques to track down customers who are uncontactable at a given address and finding their current address.

The address where the company’s business is carried out if this is different to the registered office.

A winding up order is an instruction from the court to close down a company and liquidate its assets. It follows a winding up petition that’s been made by a creditor, which typically follows a series of unsuccessful attempts to recover their money.