2018 brings with it LPL’s 40th year of trading and we are proud to have served you for so long during this time.
LPL was established at the dawn of the credit explosion and the massive increase in credit card usage.
During this time LPL has maintained the approach that LPL clients use our services as a seamless extension to your own credit control functions, when needed.
From the many external methods of credit control support available to you from Factoring, Invoice discounting, Credit Indemnity, to name a few, LPL has always strived to promote the fact that it is your own internal Credit Control safeguards and precautionary measures which will minimise the risk of unauthorised and/or extended credit .
With regards to slow or problem payers the key factor has always been knowing when to act in escalating the matter to LPL.
As we start what we believe to be another challenging business year we want to remind you all that LPL services are readily available to you; from credit control advice or fast Credit Reports. LPL are here to support the smallest doubt troubling your well proven credit control ‘gut feel’, allowing you to tackle Problem Accounts way before they become a severe problem. But of course LPL is always available for collection matters still requiring third party intervention.
In any industry we have all seen profit margins reduced and the fine lines between cash flow and profit has become even tighter to control.
Some years ago we came up with the slogan:
“Control Credit before Credit Controls you!”
During 2017 we saw yet again some big companies fold: Monarch Airlines, Multi York (Furniture) and Misco to name but a few.
And with the year starting with yet more problems for the likes of Toys R Us.
Therefore now more so than ever it is vital that you keep a regular check on your aged debt, 60 or 90 days can be too long a time when it comes to collecting.
While it is often said that aged debt may only represent a small percentage of your total turnovers…….I am certain that the powers that be within your company would jump with joy if they could increase that turnover figure by the same amount?
Whether you are a Small or Medium sized company or a blue chip PLC, we have all learnt in recent years that a reasonable DSO figure is considered an asset and essential to an improving cash flow situation. In 2017 LPL maintained its total Collection and Clear up rates in the regions of 85% and upwards.
When it comes to all things ‘Credit’ related our advice is available at any time. The ability for us to write to your customer via LPL demands or a Solicitor’s Letter before Action is already set up and in place via your pre-paid Voucher Units.
Alternatively, if you deem a potential instruction more problematic our Fast Track service allows one of a highly trained account handlers to establish immediate contact with your customer to manage and monitor effective movement of the account.
But even more importantly, we must not leave an overdue account too long, otherwise, with the strains that businesses are currently facing, a Slow Payer can fast become a Bad Debt!
A seamless credit control process not only generates a professional perception of your business but increases cash flow. Over the past 40 years LPL has continued to help businesses achieve just that.
For further information or should you wish to discuss any credit related matters please do not hesitate to contact us on: 020 8551 4019.
Although early days yet and the signs were ‘on the wall’ for at least 18 months, the fall out from the demise of Carillion will be huge.
I write this article with no sense of satisfaction that ‘I told you so’. It was obvious long ago and no company or organisation in this modern world is ‘too big to fail’.
It has always been obvious to me, particularly in the Building Sector, where, on larger contracts, profit margins are driven down by competition, there has to be a weak point. In this case and many others , now and in the past, it is the payment department. Perhaps I should really call it the strong point.
Lets keep it simple: to protect cash flow (robbing Peter to pay Paul) companies will simply slow down payments, create elaborate discount schemes, create delayed sign-offs, introduce payment hurdles from 16 digit time barred order numbers to near impossible on-line payment demand applications. I have pointed out over the years many larger companies deliberately introducing Accounts Payable policies designed to delay and frustrate suppliers, from the largest companies in the Food industry through to what we see today in the Building sector, the tip of a very dangerous iceberg. Companies operating on a day to day cash basis using suppliers money – not necessarily the high risk expense of secured bankers support – but often the smaller supplier, keen to obtain the bigger contracts and often out gunned by the weight of clever manipulation on payments from the bigger customer, all providing a massive Thank You from shareholders by way of bonuses to the directors of same.
As a Commercial Debt Collector I am often accused of being very cynical in the way I describe these payment practices, but as we go forward and see what is happening it really is obvious. As there are more and more constraints on cash, borrowings of all kinds and pressure on margins the smaller supplier is often the victim. It is endemic throughout our business culture and that includes Government, Local Government, The NHS and businesses in general.
Carillion in particular had an inbuilt and sustained culture and policy deliberately operating to slow payments and thus contribute to their day to day limited cash reserves, until now. Together with other reasons of course it now results in the demise of thousands of jobs and businesses directly and worse still indirectly.
I have always believed in the old adage KISS, Keep It Simple Stupid. In my world of credit control and collection over the past 10 years I have seen a slow but steady influx of ideas regarding computation of DSO figures, discount payment schemes, cash flow analysis, computer programmes giving the most complex of cash flow projections and algorithms to maintain optimum performance and all sorts of legislation to protect the consumer. I have seen the relaxation of Companies House rules in regards to Director details, introduction of Pre Action Protocols, Greater Data Protection Rules, Pension Fund Protections and on it goes. Some good some bad, I leave it to you to decide, yet still we see the second largest construction and services company in the UK fail.
It is time to re-examine just how responsible directors of these types of companies should be. Indeed I see directors of the smallest companies as well, using Companies legislation to protect the business from creditors when it fails. Limited liability, being the key, yet the flouting of the rules has been obvious but the ability to make individuals responsible has been impossible in many cases, both by way of the Courts and the economics of the matter.
Unfortunately in the building sector in particular many small contractors/suppliers simply have not had the correct paper work in place to fight their corner regarding payments. Additions and amendments not properly documented or agreed and constant arguments with Quantity Surveyors simply going around in circles until a significantly lower payment compromise can be reached, many months into the future.
It is a fact of life that bullies never prosper, but at what cost. We need to look at payment practices in more depth, not just by way of increased implementation of Late Payment Legislation in the commercial sector, but exactly what methods companies are using to delay payment and bring about some rules to protect the supplier in more simple terms.
For instance those companies that simply stop payment if no order number is available, it should be easier to ensure that other proofs of supply and/or delivery is accepted without delaying payment significantly. If a Limited Company has not made a return in due time, regardless of the fact that it is ‘Live’ at Companies House, the director(s) should be treated as an individual, with personal assets at risk if sued for payment.
Suppliers must be aware of the payment risks whoever they supply. It is important to act quickly if payment is delayed and have in place the best possible paper work to support the order, terms of trade, delivery etc. It is not always easy to take a commanding attitude when one is a small supplier in a competitive world but suppliers must have enough faith in the product or service supplied to be a little more forthright in demanding payment in due time, it does pay off.
I know there are many reasons why companies fail but my focus is on avoiding late payment and hope that rules can change to ensure there is never another Carillion type disaster. We seem to say the same thing every time a big name goes……….Rover……Woolthworths…….Northern Rock……….BHS……….!
The pace of work certainly seems to be holding the same high rate of momentum off of the back of last year and now we find ourselves into the second half of February already!!
The headlines in the media may have changed from Recession to that of Brexit as well as Mr Trump! BUT what remains ahead of us on the horizon in a business capacity, is still very much holding a great deal of uncertainty!!
In the hear and now, LPL who has always gauged a general feel across many sectors and industries due to the benefit of serving our 13,000 strong and loyal client base. It is in our opinion, based on feedback that expectations of growth and profit have been lowered in recent years. For some the ability to stay head above water has been the equivalent of growth in itself. Having said that slowly and surely business’s are realising that with focused hard work growth is possible and without having to rely too heavily on the banks support.
Therefore LPL feels as though it is our duty to remind our clients when giving credit to new or existing customers of the basic rule of (credit) law…… ‘Never let your guard down!’ Which LPL has promoted for..ever! As many of you would have heard me tell you.
The issues sometimes preventing us for securing the risk of providing credit still remain the same…..
Time! with too much to do and not enough time to do it in allows us to rely on the old excuse of “Well, we know this customer, they have always been a bit slow but they eventually pay! When in fact if you run a very simple and quick Credit Check you may be surprised to see a very different story?
The Powers that be! Whether it is the Boss or the sales team who ultimately make the final decision to give credit. LPL will stand firmly in the corner and support your Credit Control function in providing ‘Opinion’ and ‘Advice’. Two basic commodity’s which can safeguard your cash flow! Which for today it maybe fine but we safe guard it for tomorrow too, think about it?
Could you answer Yes to the following questions?
Do you know the credit position of your customers. accounts, returns, net worth etc?
Do you have written orders in place, confirming quotation, payment terms, authorised and signed by the correct person and not relaying on a verbal?
Do you have systems in place for ensuring overdue invoices are chased up immediately if they are not?
Do you have systems in place to ensure you have met customers requirements for when you invoice, and deal promptly with disputes?
As mentioned to you earlier the most important commodity you have with LPL is the benefit of our 38 years of expertise and experience to aid and assist with any credit related matter.
Now more so than ever it is vitally important to use LPL in safeguarding the risk of making sensible credit decisions or that of chasing overdue accounts sooner rather than later in a professional way.
Should you have any query whatsoever and you wish to discuss either with myself or one of our expert advisers then do not hesitate to get in contact.
With the finger on the Article 50 trigger and America’s new president aiming at anyone and everyone else!! here is to, what will no doubt be, an interesting 2017
Gavin Levene MCICM
LPL Commercial Investigations
020 8551 4019
Has it affected Credit Control and Debt Collection?
We are still in Europe…It is business as usual………
Whilst there has been an immediate impact on the property and building sector and an increase of instruction to LPL in these sectors, the impact seems to be more on new building and property ventures rather than being a legitimate reason to withhold payment on existing contracts. Within a small segment of this industry sector there has always been a problem area, particularly regarding retention arguments, QS sign offs and the like.
We always advise our clients to be prudent with all relevant paperwork and be diligent in chasing slow payment and establish reasons for non payment. Advice that we have been giving for many a year whether in or out of Europe.
Of course I cannot talk for the cost of exports being more favourable as exchange rates fluctuate and how the general sway in rates affects businesses that export or import, but at the moment as far as legislation is concerned, the UK is still in Europe and will continue to be subject, good or bad, to the rules and regulations currently in place.
In fact in my world of credit control The Late Payment Act, as with other legislation, has to be enshrined in UK law by Act of Parliament and placed on statute. Therefore any laws that are discussed in the future that this or subsequent UK Governments wish to abolish need to be repealed by Act of Parliament. A long and arduous process. As far as LPL is concerned and for commerce in general I do not see the need to repeal any Late Payment laws. It has, since inception in 1998 helped thousands of businesses recoup collection costs, and has been the main single piece of legislation that has assisted in getting many commercial slow payers back to proper and agreed payment terms as well as keeping local authorities and government institutions within agreed payment terms, thus assisting many SME’s in particular to regulate and manage cash flows.
So regardless of how any of us voted and the future political scene I am confident in predicting that there will be no sudden surge of late payment genuinely attributable to Brexit and there will be no unexpected rise in business failures and personal bankruptcy. Unfortunately there will certainly be those usual slow payers adding Brexit to their list of excuses for non payment but I think it is business as usual for the next few years at least.
Stephen Lewis FCICM
Managing Director: LPL Commercial Investigations.
Stephen is a Fellow of the Chartered Institute of Credit Management and served on the Board of the Credit Services Association for over 15 years, in which time he was president for three years, headed up the CSA Training division and served on the Government working party introducing late payment legislation to UK Statutes.
You can contact Steve at: firstname.lastname@example.org
As commercial collection specialists we know that there still exists a collection problem that seems to endure the passage of time, regardless of financial crisis, credit, squeezes and the like. A problem that now seems to be reaching epidemic proportions. In simple terms it is the common problem of Limited Companies, in particular those regarded as SME’s, simply ‘closing down’, ‘ceasing to trade’, ‘going Trace’ and many other euphemisms for much the same outcome – the supplier is not going to be paid and there is no formal liquidation or insolvency protection to give a proper explanation as to what has happened.
These debtor companies are not always obtaining goods with a view not to pay, many simply do not have any assets that would make a formal liquidation worthwhile, either for the directors, shareholders or creditors, secured or otherwise, indeed many such companies will simply wait to be struck off by Companies House, or even apply, themselves, to be struck off. In many cases creditors do not feel it worthwhile to take legal action including winding up proceedings. In these instances the list of creditors would not be particularly great in monetary or volume terms, but can in many instances strike the death knell for a small supplier who now has to consider writing off the debt.
All that being said there are Companies, run by Directors, usually the major shareholders, who either have a complete disregard for their legal obligations , knowingly, or by virtue of example, they think that it is very easy to set up and operate as a limited company and thereby feel that they completely remove their personal obligation to payment of trade debt.
LPL has numerous examples of such companies and the havoc they reap on suppliers, small business in particular, which have not taken better precautions before dealing.
We take a more in depth view of how some of these Limited Companies have been trading. It is a simple exercise to obtain dates of Returns and Filings (Accounts) details via Companies House website and looking at any filed information and director details in more depth from our partnerships with major information suppliers. In many instances we confirm that the Limited Company has not been trading properly within The Companies Act 2006 in particular. Is it up to date with Returns and Accounts, has it filed any due Returns, is it filing as a Dormant Company, do the dates on the invoices we are chasing appear to contradict any of this information, e.g. Orders and invoice dates actually coincide with the dates that the company was filing a Return as Dormant, or the invoices are dated two years after the last filed returns and/or accounts, – extreme examples but it forms a picture.
It is no secret that Directors can be taken to court on the grounds of ‘wrongful trading’ but often it has been as a result of an Insolvency Practitioner’s report after a formal liquidation. This report was then sent to the Dti (now BERR) for them to consider whether it was useful to take such action. There still exists possibilities for creditors or shareholders to take directors to court, but in all these instances it is on the assumption that the Limited Company had been the entity that owed the debts, at least up to the point of legal action. Often, such action is thought too costly to contemplate by a small creditor and the result is all too often not to the benefit of unsecured creditors anyway, being the ultimate sanction that Directors were then disqualified as well as perhaps having to pay monies to secured creditors.
LPL has for some time been drawing a slightly different conclusion regarding these errant companies, based upon the results of our enquiries we can suggest that the company is not the relevant legally responsible entity for the debt we are chasing. We therefore hold the directors as individuals/proprietors or partners liable for the debt and often take legal action against them on that basis. Of course we take great care to give the individuals every opportunity to prove that they are directors of a properly trading limited company. Offering such confirmation should never be difficult; information from a certified accountant, vat records, tax returns, in fact any number of ways. Information which is requested on a voluntarily basis and if available and confirmed, obviously allows us to attempt collection from that correct entity.
Our own statistics show that where our investigations lead us to the above conclusions less than 5% of those listed directors could actually show that they were properly trading their Limited Company. More encouraging is the number of legal cases that are concluded successfully on behalf of our clients, with UK courts now far more attuned to how Limited Companies should be trading and understanding the abuses of a system that still needs to be tightened up.
The Companies Act 2006 is welcomed because it outlines the obligations of directors under common law and prescribes in better detail directors obligations to members, suppliers and others and their obligations regarding notifications to Companies House.
On the downside the 2006 Act changes address notification for directors. Generally only a service address needs to be filed for public access and although a private address must also be filed, it will only be available to specific public bodies and Credit Reference Agencies, which does slow down verification processes for suppliers unless they use such agencies. The other problem being that there is no actual verification by Companies House of any private address filed. Companies House will say that they are record keepers and not policemen but there is a need for them to reduce the ways that directors can abuse the use of limited liability protection. Whilst fines are in place to ensure proper notification by directors, unless there is better verification procedures the problems simply remain.
It is even more important now for suppliers to check new customers, particularly limited companies, to ensure that to their best efforts the potential customer is trading correctly within current legislation. It is still far too easy to gain credit using limited companies that fail to satisfy the simplest tests of legitimacy. From our research it is particularly common within the catering, restaurant, retail food and building sector but by no means restricted to these areas. It really boils down to suppliers taking more time and effort to credit check all customers, existing and new. If a limited company does appear to simply ‘cease to trade’ the supplier need not immediately assume that they will simply be the losers as unsecured creditors.
For more information: email@example.com
When the Editor of Credit Managament Magazine asked me to write an article on ‘What to look for when choosing a commercial debt collection agendy (DCA)’, I did not realise then what a difficult task it would be. After some thought realised that I, as a Commercial DCA operator, had been looking at the criteria from my point of view and had to think hard as to what it is the client actually wants and needs.
I started looking more closely at ours and other Commercial DCA websites: explanations of professionalism, success, statistics, words of endearment from exisiting users, long and detailed instruction forms accompanied by n-depth, complex terms and conditions, not forgetting colourful accreditation from as many organisations as will fit the page. And, oh yes, the cost – although I am bound to say that the actual cost to the client is often the hardest fact to find, even though it is doubltess important.
As a DCA there is a danger in becoming complacent to the success of our collection rates and relationships with clients built up over years and our wonderful explanations of what it means to ensure compliance and our duties to statutes, CSA Code and of course our latest success, becoming authorised and regulated by FCA. All the things we see as most important to us actually, from many of our Client’s point of view, is ‘almost’ irrelevant.
When I started to analyse the Client perspective it became apparent that the main reasons why they use us, and I must assume the overriding criteria with any other agencies they may use, fall within much more simplistic criteria. I believe it to be more a wish list than a prescriptive criteria, which is probably why fulfilment of this task started to get difficult So not in any particular order some main ‘Wants’:
- What are our fees,
- How applied
- When applied
- Will Fees remain as quoted as the case progresses
- Full explanation and risk if a matter ‘goes legal’
- Will we get any fees back from the debtor
- Do we offer other services: Legal, Tracing, Training etc.
What also became apparent as an important quality is the relationship between the actual operative dealing with the collection and the interaction with the Client, be it the receptionist through to the Credit Controller and Financial Managers/Directors. And whilst a priority to us that monies collected are placed in a client account and financial probity a must, it is often not the highest question on the list with potential clients. That is because the Client wants an overall feeling of trust between themselves and the DCA, established through the personal contact and personalities between each.
This may appear to be an overly simplistic view of what is required, but we must appreciate that in our industry sector 60%-70% of our client base and potential client base are SME,s. Of course it would be naive to think that they or larger and multi- national companies do not look at all the financial implications of outsourcing some debt collection, as well as having regard for accreditations, but it more often than not still comes down to simple trust and that most important of qualities, Transparency in all our operations.
When a trust is built up between DCA and Client then a successful debt outcome can also mean a good reason why a debt is not going to be collected which can include reasons that make it impossible, such as bankruptcy or liquidation and more importantly the less factually supported reasons such as whether it is cost effective to continue. The important thing is that a good DCA/Client relationship means that there is trust in our judgement on the matter. The DCA becomes an integral part of their financial decision making.
That said, whilst we may think we are the most important thing to our client, it is really often a small part of their operation generally. Clients are far more concerned with sales, supply and other matters.
We still need to identify with their product or services, we cannot collect effectively unless we understand their industry, Clients naturally assume we have an understanding of their particular industry. But to sum up in everyday terms, Client wants transparency in charges and operations, a simple way to instruct, reporting procedures supplied when they want them , not when we want to send them. A trust in the knowledge and advice given to them. …and also on the list, recommendation, financial probity, and perhaps accreditation .
We must strive to supply success, honesty, knowledge and professionalism that match client expectations. Clients do not always question our compliance or accreditation, it simply trusts us to be all those things as a given. What we must never do is let them down.
Stephen Lewis FCICM
Managing Director – LPL Commercial Services
UK businesses now owe almost £2.6bn to HMRC in overdue VAT, as late payment from clients forces them to delay paying tax, a finance provider has claimed.
This outstanding amount has remained consistent during the past few years, with the improving economy having little impact on the level of VAT arrears and late payment.
The value of overdue VAT has risen slightly during the past year, going from £2.55bn in 2014 to £2.58bn in 2015,.
One of the biggest drivers of VAT arrears is late payment experienced by SMEs since the credit crunch. This has led some businesses to delay remitting VAT to HMRC while awaiting payment from clients.
VAT is paid not on a company’s actual revenues, but on the amount billed to clients, regardless of whether it has been paid or not.
Should a client pay late, the business will still be expected to pay the VAT on the invoice, despite having less cash flow to do so.
It adds that because VAT is now 20 percent, it has become a significantly larger tax consideration than pre-2011, with more businesses affected by VAT bills they struggle to meet through cash flow.
Peter Alderson, managing director of LDF, said: “VAT bills can very quickly become a problem for SMEs if their clients delay paying their bills, and we understand that this is a real problem for many small businesses.”
“Even though economic growth is accelerating and order books are growing, the problem of VAT arrears does not appear to have improved.”
Alderson explained that VAT bills should not start to compete with plans for investment .
He added: “Businesses need to plan ahead to make sure they know how their upcoming tax liabilities are going to be covered, allowing them to ring-fence the funds they use for growth.
“This is a time when businesses should be able to make significant investments in staff and equipment as the economy grows, however late payment can make this difficult for a lot of SMEs.
British SMEs are now owed £67.4bn in unpaid invoices, a rise of eight per cent from £62.5bn in the last year alone, according to a new study.
The Asset Based Finance Association (ABFA), the invoice finance trade body that published the study, said the total marks a 36 per cent increase from £49.5bn owed in 2011.
The research shows the full extent of overdue payments and extended payment times now hitting SMEs – a growing problem.
Previous research from the ABFA showed that SMEs are now waiting an average of 72 days for payment of invoices, up from 61 days at the height of the recession in 2009.
However, the ABFA says businesses should view these unpaid invoices not as an unavoidable drag on their cash flow but as one of their most valuable assets which they can use to unlock funding.
The ABFA notes that, whilst the recovery is taking hold, businesses are not accessing the finance that could allow them to invest and grow.
Jeff Longhurst, chief executive of the ABFA, says: “The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth.
“Businesses need to recognise that their unpaid invoices are an asset. In many cases, they are the most valuable asset an SME has, and they can be the key to unlocking critical and affordable funding.”
ABFA members currently provide £9bn in finance to SMEs against the value of their invoices, and at any one time will be providing £19.3bn overall in asset based finance to businesses.
Longhurst added: “Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of SMEs. But it can also help many more businesses.”
He explained that even this £67.4bn figure in unpaid invoices is likely to be a conservative estimate of the true value of unpaid invoices, as it only reflects the invoices of 180,000 SMEs that report detailed accounts. The true total value is likely to be higher.
It says that outstanding invoices from SMEs in the construction sector currently stand at £7bn, amounting to 16 per cent of annual turnover in the sector.
Small and medium-sized manufacturing businesses are owed £13.4bn by their customers, which represents 17 per cent of their annual turnover. Across SMEs as a whole, unpaid invoices amount to 14 per cent of annual turnover.
Separate research by the ABFA recently showed that construction businesses wait an average of 107 days for payment.
Over the last five years, debt has not just increased amongst consumers, but a new strata of commercial debtors has also emerged. There are now sub-cultures within what one would normally label ‘traditional’ consumers and businesses: those that understand their legal responsibilities and ignore them, and those that bury themselves away in an ‘insolvency culture’, believing that wherever the fault may lie, the law will protect them. It is an attitude that is becoming increasingly prevalent.
Contributing to an increase in late payment are customers that have a complete disregard for the principles of legal responsibility, and which I refer to as ‘low-intent debtors’ – those who use this emerging culture to avoid payment. And there is a recognisable behaviours pattern for many of this type.
The spreading and increasing culture of late payment, in part caused by the insolvency sub-culture, cannot just be blamed on easily available credit. Credit has been available for may years. Later emerging credit cultures such as we see in Germany, Holland and France have not caused so many problems.
So what is going wrong in the UK?
Let us consider limited companies. Companies House can be where many of the problems start. Firstly because there is some confusion as to its actual role: is it there to strictly enforce and police the registration of limited companies and LLPs, or is it just a record keeper? Indeed should it be both?
Secondly, should there be more or less regulation and address checking when setting up limited companies?
Can any business, I wonder, state that it has suffered loss as the result of the lack of information available from Companies House?
A small but significant number of new companies will have no intention of filing adequate returns or accounts, neither would the director information filed stand up to scrutiny.
It is often the case that very large amounts of credit are given without any credit checks or precautions. Even if status reports were available, there is little upon which to base a credible opinion. In the headlong rush to do business, some suppliers (understandably, but foolishly) extend credit without proper evaluation of the risks involved.
In such a competitive world often the risk to supply outweighs good business practices. But it gets worse. The sub strata of businesses taking credit will often deliberately allow themselves to be struck off the Companies House register and then start up again with slightly different names.
A typical example: ABC Export Limited obtaining credit, allowing itself to be struck off but it has carefully and quietly also been trading as ABC Exports Limited and will happily issue cheques in yet another name because the bank had not bothered to specifically check account details. And as an extra bonus, it will have transferred all assets long ago to yet another trading entity. In short, it has always been the deliberate intention to avoid the payment of debt.
The law is very specific on this point. One person cannot change the contract. There is case law to support and it is a myth that one must take notice of a request to accept a payment in full and final.
As you did not specify before the cheque was sent that you would accept it in Full and Final, they took it upon themselves to suppose same. You are fully entitled to bank the cheque. The law states that the recipient must, within a reasonable time, write or contact the payer to say it is not accepted in Full and Final. Obviously that means after the payment has cleared otherwise the payer could stop same.
Regardless of what they have written separately or on the cheque once it has cleared we will write to the debtor stating the above facts and that the balance is still due. We know that there will be an argument because that is why they paid less, but in Court they would lose the case!