An A-Z Of Debt Collection Jargon (Part 1)

When it comes to the world of debt collection, there is a lot of jargon to get your head around. But don’t worry – we don’t expect you to understand all of it – that’s what we’re here for! We believe in simple communication in plain English, so that everyone is on the same page. To help with that, we’ve created a glossary for the most common debt collection terms you’re likely to come across. We don’t have enough time to cover all of the terms in one blog post, so we’ll be making a series of this. Be sure to check back for part 2!

A’s

Accounts Payable: All money a business owes a creditor for the provision of its goods or services. In other words, all the money you owe other people.

Accounts Receivables: All the money a business is owed in return for the provision of its goods or services. In other words – all the money people owe you.

Administration Order: This is an official court order issued by a county court. Its purpose is to aid in the administration of your payments to creditors. This is applicable if you have at least one County Court or High Court judgement against your business, have combined debts of under £5,000 across at least 2 creditors, and can’t afford to pay the full amount of your settlement each month. One payment is made to the court, which splits this sum between each creditor on a pro-rata basis. Having this in place also stops your creditors from taking further action against you.

Aged Debt Report: A document detailing the balance each of your customers owes you, split by either the invoice issue dates or the due dates.

Arrears: The legal term for an overdue debt.

B’s

Bad Debt: This is money that a customer owes you, but is considered irrecoverable. There are a number of reasons you might not be able to recover those funds, and we explain more in this blog.

Bad Debt Relief: A way you can reclaim the VAT paid to HMRC for the sale, done by writing off bad debts of more than six months.

Bankruptcy: A legal process, similar to that of personal bankruptcy. Here, a business is declared insolvent, and therefore unable to settle any of their outstanding debts. Any remaining assets the business have are transferred to a trustee and sold, with the money raised being used to settle any existing debts, while any remaining arrears are written off.

C’s

Cash Flow: A term used to measure the immediate financial health of a company. This is calculated by cash in minus cash out over a specific period of time. You can also forward plan to get an idea of the future health of your business using a cash flow forecast.

CCJ: Short for County Court Judgment, which is an order that tells you to pay money you owe to a debt. It’s one of the actions that you can take as part of the debt collection process. The recipient of a CCJ has just over 2 weeks to respond to it,

Compulsory Liquidation: When a business is liquidated by request of the court. The alternative is voluntary liquidation, which is instigated by the company.

Company Voluntary Arrangement (CVA): If a limited company has been declared insolvent, they can apply for a Company Voluntary Arrangement, or CVA. This document contains a proposed schedule to pay creditors what they are owed. If 75% of the company’s creditors (in terms of debt value) agree to the CVA, then the company can continue trading, with  scheduled payments made through an insolvency practitioner until the debt is fully paid off.

That’s all for part 1! Be sure to keep an eye out for part 2, and even more definitions of debt collector jargon. In the meantime, if you have any questions about the debt collection process, or need advice on reclaiming a debt owed to you, please just get in touch with the team today to book your free consultation.