Case Study: When Finance needs a clip round the ear

There can be various reasons for a customer’s finance department to delay payment. Sometimes it’s a deliberate policy to help their own cash-flow, it might be incompetence, or indifference to agreed credit terms. In the case below, our client had lost patience with the finance department of their customer who they otherwise had a strong relationship with.

Our client, a recruitment agency based in central London, had been placing candidates at a large company specialising in providing remote patient monitoring technology. The recruiter had placed several candidates over two years and had developed an excellent relationship with the HR department. The finance department however had consistently been late in paying. The latest invoice was issued in October ’22 on 30 day terms, and despite a lot of chasing, it was still outstanding in the middle of February. The finance department went completely silent, not responding to emails or calls, and seemed never to be in the office. HR did try to chase internally for our client and, embarrassed, had assured them multiple times that payment would be made shortly. Finally our client lost patience and referred the debt to Sterling, asking us to try to maintain the relationship with the customer, but to teach the finance department a lesson.

Sterling started chasing the debtor, and after a week we achieved payment of the full outstanding invoice value. Whilst this was a reasonable result, it would leave our client out of pocket somewhat as they needed to cover Sterling’s commission, and it wouldn’t have the desired effect of inducing the finance department into improving their payment habits.

Sterling persisted with the debt, explaining to the finance department that they were contractually liable for an increased engagement fee as they had breached the terms of business through late payment. The discounted rate they had paid no longer applied, and a higher rate was due, almost double the value of the discounted rate.

After two more weeks of deliberation the finance department paid the remaining debt. The original, discounted engagement fee was a little over £8k, whilst the full debt collected was almost £15k. This was a very expensive lesson for the finance department, but a reasonable consolation for our client who had been forced to wait 3 months for payment. With Sterling’s commission considered our client received over £5k more than they had invoiced. On top of that they still retained their relationship with HR, and the ability to continue to do business with their customer, albeit with a finance team that would be far more likely to pay them on time.