By Paul McCord, Commercial Solicitor
Although most of your customers are good payers, you may come across some that are difficult. There are endless promises to pay but somehow the cash never materialises. You can spend fruitless hours telephoning bad payers who seem to be permanently out of the office or in meetings. This is valuable time that could be spent serving your existing customers or generating new business and for some companies the effects on cash flow can be devastating.
Get a grip of bad payers with Late Payment Legislation
Legislation is in place to protect your business from the effects of bad debtors. Since 2002 the Late Payment legislation has enabled all businesses to claim interest for late payment; to claim reasonable debt recovery costs, in most circumstances; and to challenge contractual terms that do not provide a substantial remedy against late payment.
In addition to this, private sector companies must pay within 60 days and public sector companies must pay within 30 days.
Using Credit Management as a deterrent
The late payment legislation was designed to be a deterrent against late payment, and to be used as part of any business’s credit management system.
A payment is late at the end of an agreed credit period, or if no agreed credit period is in place, after a period of 30 days. You can therefore take control and immediately claim when a payment is late. You don’t need to include the provisions in your terms and conditions and you can claim additional recovery fees as well.
When the payment is late, you should inform your debtor of your right to claim under the late payment legislation and that the rate is set at 8% plus the bank of England base rate. You can also claim a fixed compensation figure. The notification should be in writing and include information such as how much is owed; to whom payment should be made; and by what date.
What happens if they still don’t pay?
Inevitably some debtors will still not pay and your late payment of interest claim can be included in any court action for debt recovery. You have six years in England and Wales to recover a debt and late payment interest; and it can speed up the process if the claim is handled by a specialist commercial litigation solicitor.
Having a strong policy on debt recovery is vital to the success of your business. Rowlinsons Solicitors can help your business use the late payment legislation as part of your credit management strategy and provide expert commercial litigation advice when debtors won’t pay up.
Make certain your credit management procedures are working for your business and book a FREE Legal Health Check with Paul McCord on 01928 735333.