On 2nd November 2017, the Bank of England increased the base rate of interest from 0.25% to 0.5%. This is the first time that interest rates have been increased in more than a decade.
A rise in interest rates affects business activities as well as the buying habits of the customer. In this article, we look at the potential impact on business debt collection and the Late Payment of Commercial Debts (Interest) Act 1998.
Late payment can be a huge problem for businesses. According to the Federation of Small Businesses (FSB), SMEs in the UK are owed on average £6,142 in overdue payments by larger firms. This can cause severe cash flow issues for these SMEs and it has resulted in the closure of several companies over the years, motivating the Government to take action against the culture of late payment.
The aim of the Late Payment of Commercial Debts (Interest) Act 1998 is to assist the debt collection process by allowing businesses to add fixed sum compensation, interest and reasonable costs to overdue invoices.
What is the interest rate under the Late Payment of Commercial Debts (Interest) Act 1998?
The Act allows interest to be applied at a rate of 8% above the Bank of England base rate per annum from the date the debt becomes due.
What does the base rate rise mean for late payment interest?
It should follow that the interest rate under the Act is now 8.5% due to the base rate rising to 0.5%. However, that is not the case just yet and the late payment interest rate will remain at 8.25% until 31st December 2017.
Why is interest under the Late Payment Act remaining at 8.25%?
The base rate for late payments is fixed every 6 months for the purposes of calculating the interest owed on debts. Therefore the base rate on 31st December is used for debts that fall due between 1st January and 30th June and the rate in force on 30th June is used from 1st July to 31st December.
If the Bank of England does not change the interest rates next month (December 2017) the interest rate applicable on debts that become due between 1st January and 30th June 2018 will be 8.5%.
How do I know what interest rate to apply for an old debt?
It is possible to look back on historical Bank of England Interest Rates. however, for ease of reference we have set out the applicable interest rates below.
| Period Debts Were Due | Bank of England Base Rate | Late Payment Interest Applicable |
| 1st July – 31st December 2017 1st January – 30th June 2017 1st July – 31st December 2016 1st January – 30th June 2016 1st July – 31st December 2015 1st January – 30th June 2015 1st July – 31st December 2014 1st January – 30th June 2014 1st July – 31st December 2013 1st January – 30th June 2013 1st July – 31st December 2012 1st January – 30th June 2012 1st July – 31st December 2011 | 0.25% 0.25% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% | 8.25% 8.25% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% |
As mentioned, cash flow issues can arise if late payments are allowed to persist. Debt collection either in house or through a third party debt recovery provider is essential for any business. This includes utilising the Late Payment of Commercial Debts (Interest) Act 1998 during your debt collection process to ensure you are sufficiently compensated for the delay. By taking positive action you will help change the culture of late payment.
Find Out More
Go to the main Late Payment Law page
Read: Late Payment Charges – What You Need To Know
In July this year one of the best-known credit monitoring companies in the UK, Equifax, admitted that well over half a million UK consumers had their personal information compromised in a cyber-attack.
Sadly, this kind of thing is not uncommon, and as our reliance on technology grows the threat of such attacks will only increase, according to the National Cybersecurity Centre.
Since October 2014 a Government scheme known as Cyber Essentials has been mandatory for any supplier to Government working on contracts which involve the handling and storage of personal information for UK citizens.
There are two levels of cyber security that a company can reach, known as Cyber Essentials and Cyber Essentials Plus, with the latter involving the independent testing of company systems by an external certifying body, using a range of different tools and techniques.Lovetts Solicitors are pleased to announce that we have achieved Cyber Essentials Plus certification, meaning that we have taken the highest possible precautions against cyber-attack as recommended by the UK Government, and that our policies and security measures have been independently verified by Government approved auditors.
Here at Lovetts we believe that the personal data provided to us by you, our clients, deserve to be protected from cyber-attack in the best way possible, which is why we have taken this important step. We would encourage all businesses to challenge their suppliers and subcontractors as to whether they have gained Cyber Essentials accreditation and, if not, why not!
As we move into an era where cyber-attacks are becoming more and more common, rest assured that your personal information is as secure as possible with us.
When the Late Payment of Commercial Debts (Interest) Act 1998 was introduced it had two clear purposes.
The first was to ensure that creditors were properly compensated for the late payment of any debts, and the second was to avoid late payment being an issue in the first place.
With that said, there is still a certain amount of confusion over what a business can do about late payments from a customer. We’re going to clear a lot of those questions up today.
What is the late payment law in England?
The most asked question on the subject. Everything you need to know about late payment law in England falls under The Late Payment of Commercial Debts (Interest) Act 1998, which came into force at the start of November 1998. Since that time it has been amended slightly to fall into line with a European Directive but remains largely the same.
The first thing to point out here is that this law only applies to commercial debt, but isn’t exclusive to Limited companies. It can also include a sole trader, freelancer or anyone else who is categorised as self-employed.
Basically, the debt has to have arisen from some sort of business transaction. Personal transactions don’t apply.
How do I know if I can use the late payment law to recover a debt?
As mentioned previously, the debt in question has to be of a commercial nature. If it’s a personal debt owed to you by an individual for non-business purposes then this law won’t apply.
If, however, the debt is business related then you can take the steps provided by this law to recover any debt owed to you.
Again, it doesn’t matter if the debt is owed by a Limited company, a partnership, a sole trader or even a freelancer. As long as it’s of a commercial nature then it falls under this law.
It’s also worth noting that you can also claim retrospectively. You can claim compensation from clients who have been late in paying their debts up to 6 years in the past.
How much interest can I charge for a late payment?
Interest rates are set to a standard rate twice per year for a six-month period. From January 1st until June 30th, then from July 1st until December 31st.
The standard rate is set at 8% above the bank of England’s base rate at the start of each time period mentioned, although both parties can agree on a different rate of interest if they so desire so long as it’s considered a substantial remedy.
What isn’t allowed is a purchaser trying to force a supplier to accept a low rate of interest when the agreement is struck, as this is seen as a way of trying to evade this act. A low-interest rate clause is likely to be seen as unenforceable, at which point the official interest rate will be upheld.
As well as interest the creditor can also charge late payment charges for the cost of collecting the amount overdue. This ranges from £40 to £100 depending on the amount owed.
My customer is late paying – what now?
You have to start by contacting the debtor, and you must make sure to do so in a reasonable manner with a genuine attempt to amicably resolve the matter. This contact should take the form of emails, letters sent via recorded mail, and phone calls.
If you see no success using this first step, then you move to working with a reputable, professional debt collection specialist will be thoroughly knowledgeable in the steps to take if your initial contact with the debtor has not worked out.
It’s at this stage that the quality and professionalism of your chosen collection agency or Solicitor will make all the difference, so be sure to choose wisely!
What’s the difference between an LBA (Letter Before Action) and an LPD (Late payment demand)?
An LBA is a formal letter that your collection agency or Solicitor will send to the debtor informing them that court action is forthcoming if payment isn’t received within 7 days.
Normally this step is enough to secure payment from your client, but if not you can choose to instruct us to begin legal proceedings. At this point, you have complied with all legal requirements.
An LPD is essentially an alternative to an LBA and allows you to make a claim for interest, compensation and any other reasonable costs that have been raised by you having to collect a late payment.
As you can see, the process can become complicated for someone who also has to contend with running their business, deal with their other clients and customers and contend with day to day life, so after you make that initial contact and offer the debtor a chance to pay the debt that they owe the best course of action is to recruit the services of a specialist debt recovery firm or Solicitor who can help you get results quickly.
Written by: Charles Wilson – Lovetts Solicitors, Chairman
The many advantages of using a third party collection agency or law firm to recover debt have been well documented over the years, and although there are also some benefits to having an in-house collections team, more and more companies are using third parties today than ever before.
Although the benefits are widely known, an important question that you should be asking yourself is – how do you assess the effectiveness of your third party collection agency?
Regularly monitoring the job that they do goes a long way to ensuring that this method of collection is the right one for your business and that you’re spending your money wisely. In order to carry out this assessment, you’ll be looking to focus on two key areas : qualitative and quantitative KPIs.
Qualitative KPIs
In business, it’s of vital importance to maintain a solid working relationship with your clients, and being able to solve a debt issue without damaging a hard earned trade relationship between supplier and customer is so important. Of course, there will be instances where the relationship has soured to the point of no return, and your primary objective is simply to recover the money owed; but when a good trading relationship can sometimes take months of hard work to create you need to know that your third party collection agency is able to salvage, or even, benefit that relationship wherever possible.
Does your collection agency offer access to their services via an online platform? This allows for greater flexibility as to when you access their services, allowing you to take care of matters outside regular working hours, or get a document, or even cost summary, in a minute or two.
If they only offer direct access via telephone or in person then how responsive are they when you contact them?
Some third party agencies assign each of their clients to a case manager or paralegal, who is the main point of contact throughout the process. This has proven to be a far more effective way of working as they become familiar with your situation, they know your business and your policies on collection. Yet they should also be part of a close team, so others can help as need be.
Did you accidentally overpay a former employee?
You may also need to consider different tactics for different customers. Can you get advice on options? Some may need the urgency of the threat of Insolvency; others may just need the escalating cost of a Court claim. Yet others, only a third party phone call to ensure the right person is reminded to pay.
Consider all these factors in order to assess how effective your DCA or law firm is when it comes to quality of service.
Quantitative KPIs
While the quality KPIs can vary depending on what type of support you’re looking for in a collection agency, the quantitative KPI’s are relatively straight forward.
Look at hard figures, and the results are far easier to assess. You’re going to be looking at how long on average it takes for the agency to close a case. Are your customers responding to the methods used by your third-party collector? Are they quick to follow up on communications and deal with any issues? Or do they routinely allow issues to drag on over days or even weeks, without cause?
How many cases do they manage to close in any given time period? Most significantly, what is the success rate? How much is it costing you per case on average? As a business, you’re looking to maintain that balance between a high-quality service and cost effectiveness. Are they recovering your collection costs or commissions through the legal process, if that applies?
In the end, the way in which you assess the effectiveness of your collections agency will vary depending on the type of business you run, and your own priorities and circumstances. What is important is that you routinely run this assessment, and make sure that the third party collection agency is right for you, and delivers the results you expect.
Source: CICM – Chartered Institute of Credit Management
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Many of us have enjoyed the classic board game Monopoly, and we’ve most likely received the “Bank error in your favour, collect £200” card.
In real life though, it doesn’t quite work like that.
Overpayments can and do happen, but the recipient isn’t legally entitled to pocket the money, unlike the player in a game of Monopoly!
Did you accidentally overpay a former employee?
Overpayment of wages can happen for any number of reasons, from someone in payroll suffering a lapse of concentration, to a simple computer error. However, The Employment Rights Act 1996, which details circumstances where an employer can make deductions from an employees wages states that an employer can make a deduction from an employees wage “where the purpose of the deduction is the reimbursement of the employer in respect of (a) an overpayment of wages”, so you’re legally within your rights to reclaim any money that you may have overpaid an employee.
This leaves many employers wondering how they should approach such a scenario, as the need to recoup the money lost has to balance with not causing undue issues with your employee, especially as they were the innocent party in this situation.
There are a number of ways you can go about rectifying the error, some of which we’ll cover here today;
How Can I Reclaim an Overpayment?
The most obvious question of all when something like this happens, and there’s a quite simple set of steps you should take in the first instance.
Contact the employee involved, explain to them what has happened, let them know you’re intending to reclaim the money from their next wage and check to see if this would cause any financial difficulty for them. If the answer is that it would cause them an issue financially, then the next step would be arranging a repayment by instalment plan that both of you are happy with. If the employee indicates that there would be no financial issue then simply make the deduction from their next wage.
In many cases, it can be this simple.
How And When Can An Employer Recover Overpaid Wages?
As mentioned in the point above, in many cases it’s simply as straightforward as sitting down with the employee in question, making them aware of the situation and reclaiming the money either the next pay date in its entirety or organising to reclaim it in instalments.
Although the law states that you can make a deduction from an employees wage when an overpayment has been made, it does pay to not take the offensive on a matter such as this. Just because you can legally take payment back doesn’t mean you have carte blanche to deal with the issue as you see fit. For both good employee relations and to avoid any additional problems it’s always best to treat the employee fairly and with respect.
After all, this is an error that you made, not them.
What if I Realise I’ve Overpaid an Employee Years Later?
If the employee still works for you, then the previous points about reclaiming the money still apply. If you can prove that overpayment was made then you should contact the employee in question and follow the procedure already covered.
If the employee no longer works for you things can get a bit more difficult. You would look to try and reach out to the former employee and explain the situation, providing proof if you can.
It’s not always easy to reach someone who’s left your employment, and if you can’t find them,a debt recovery specialist will be able to assist in tracing the whereabouts of the former employee.
How do I Avoid Payroll Errors that Cause Overpayments?
The best way to avoid having to deal with overpayments is by not making them in the first place, and while that is certainly easier said than done, there are some steps that you can take to greatly reduce the chances of it happening.
The first is training. By training supervisors and payroll department employees to spot overpayment issues early you will save your company a lot of time and effort in the reclamation of payment.
Ensure that there is a procedure in place so that anyone who notices an overpayment knows exactly what they have to do, and who they have to report it to. Time is of the essence, and being able to stop an overpayment before it’s made is far more preferable to reclaiming it at a later date.
What Should be Included in a Letter Requesting the Return of the Overpayment?
We all know that raising the subject of an overpayment of salary can be a bit awkward at times, but the best way to go about it is by letter.
Sending a letter allows you to create a paper trail that backs up your demand for overpayment. It also acts as evidence that you have approached the situation with a fair hand, and that the employee in question has been given every opportunity to get involved in the process and raise any issues.
When contacting your employee on such a matter it’s generally considered proper practice to highlight certain points, which are as follows;
- The letter should inform the employee that an overpayment has been made in error, and should both state the amount that the overpayment totals, and the means by which the employer intends to reclaim the money.
- The letter should also provide the employee with an opportunity to contact the company if this method of reclamation is going to cause any financial or personal issues. As mentioned previously, it isn’t worth risking employee relations when taking the time to break repayment up into instalments can make all the difference.
Provide the employee with a set timeframe in which to contact you and request alternative arrangements, after which the initial reclamation method will be put in place, which usually means reclaiming the payment all at once from the employees next pay.
The letter should also include an opportunity for the employee to dispute the overpayment if they so wish.
In most cases, these situations are resolved without too much trouble. Occasionally an employee may require a few months to pay the money back, but it usually goes pretty smoothly.
As long as you approach the situation in a fair manner you’ll find that most employees are cooperative and will be easy to deal with.
There comes a time in the life of all businesses where they have to look at the possibility of developing a credit policy, and ask themselves if they are going to offer credit to other businesses.
The importance of this decision should not be underestimated, and it is not a choice to be taken lightly.
In particular industries, clients and other businesses will not take you seriously unless you offer some form of credit arrangement, while in others it’s perhaps not as common. Every business has to look into what their competitors are offering, and ask themselves if it’s something they believe will bring benefit to their operation.
One thing that applies across the board, however, is that there is a certain element of risk to your business whichever way you decide to go.
At the top of the list of factors to be considered is the effect on sales revenue. By offering a credit line to your customers, you’re allowing them to delay payment for the service or goods you have provided them.
In theory, this is beneficial to those customers and should help you to win more business. It isn’t all that beneficial to your financial situation short-term though and can have a pretty substantial effect on your bottom line if not managed correctly.
Providing credit can also encourage your customers to place larger orders with you if they know they won’t have to pay the entire cost up front. This is undoubtedly one of the major benefits of providing your customers with credit, and can result in a pretty substantial upturn in sales and also encourages larger businesses to work with you, which brings obvious benefits.
Offering credit also allows you to get creative with offers that you make available to your customers, such as discounts for paying cash, and discounts for quick repayment of any credit owed. Depending on the type of service you provide you can alter these offers to suit, and they can help you to win business from the competition, who may not be quite so creative on willing to provide a flexible approach.
One thing to remember though is that by offering your customers credit, you will possibly have to take on some debt of your own to help finance the transition. Being able to sell your products or services without payment being made immediately isn’t something that every business can do, especially those companies who are relatively new. If you think that taking on some debt to allow you to offer credit to your customers is something that will benefit your business in the long term then fantastic, but make sure to run the numbers before making that choice.
Another point to keep in mind is that offering credit will almost certainly bring with it the chance that you’ll encounter bad debts.
Most customers don’t go into an agreement with you knowing that they won’t be able to repay the credit you give them, but the truth is that sometimes things can go wrong in business.
When this happens, you’ll have to decide if you’re going to simply write it off as one of the downfalls of operating in this manner, or if you’re going to have plans in place to recover the money owed.
In many instances, you can write off a portion of your bad debts and still come out with a positive bottom line, but the truth is that recovering money that is owed doesn’t have to be a drain on your resources both emotionally and as far as time goes. There are reputable debt recovery companies out there who can assist you in this matter, and who can help advise you when providing a customer with credit goes wrong.
Deciding to provide credit is an important choice for any business, but if you do your due diligence and weigh up the pros and cons, you should be able to determine if it’s a road you want to go down.
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As many of you will no doubt already be aware, the Ministry of Justice has released a new Pre-Action Protocol for Debt Claims that comes into effect on October 1st, 2017.
Whenever these kinds of changes are made it’s natural to have questions, and we’re going to do our best to answer some of them for you today;
Who does this new protocol apply to?
This protocol applies to all claims by a business for payment of a debt by an individual. This could be individual borrowers, tenants, trustees and so forth. Basically, any individual who owes a non-business to business debt is covered by the new rules.
The only instance where this protocol will apply to a business to business debt is in a situation where the debtor is a sole trader. If the debt is owed by a company or a partnership then the new protocol wouldn’t apply.
Why has the new protocol been introduced?
According to the Government, the aims of this new procedure are to encourage early engagement and communications between both parties, and to increase the chances of the issue being resolved without the need for court proceedings. This can include a reasonable repayment plan or use of an Alternative Dispute Resolution procedure.
Another key reason for the introduction of this new procedure is to encourage both parties to act in a reasonable manner and to try to avoid the running up of costs which aren’t reasonable in relation to the sums owed.
What can I do to be prepared for these changes?
Perhaps the most important question of all.
The first port of call should be to educate yourself on the changes, which means making sure you have access to the required information. This protocol will require a bit more information to be included in the Letter Before Claim, so it’s important that you are familiar with this information before the date of implementation, and that you make any necessary changes to your own systems before that date.
You should also keep your staff fully informed of any changes that they may have to make to their own records and practices. Getting ahead of this and making sure they’re fully briefed will help to avoid any transitional issues later on down the line.
You should consider asking yourself if your current credit policies will prove worthwhile after the changes come into effect. Will it be cost-effective to consider legal action in cases where the debtor is a sole trader or individual? In instances where you are offering credit to customers who fall under the umbrella of this new protocol, it may be worth making changes to your terms and conditions of issue and altering the requirements that those customers have to meet. This will help reduce the chances of debt recovery.
And finally, you have to start separating sole traders and individuals from companies and partnerships on your account records. This will assist you in applying the new protocol to the correct clients if & when the time comes to pursue an outstanding debt.
Another important step that you should take is speaking to your debt recovery solicitor.
In most cases, a quality debt recovery solicitor will already be taking the required steps to implement this new protocol smoothly into their procedures, but you should certainly double check that this is the case.
If the correct steps are taken before the October 1st implementation date you shouldn’t face any real issues. It’s just a case of making sure you’re ready.
If you consider yourself the kind of business that dreads having to deal with customers or clients who have an outstanding account or an unpaid bill that needs collecting, trust me, you’re not alone.
No one likes to risk destroying customer goodwill by having to demand payment, but in many cases, there is no other option.
Before you find yourself having to go down that route though, there are steps you can take beforehand to try and avoid the situation escalating to such a level.
Ensuring that payment due by dates and terms are clear, and also indicating any interest that will be applicable if payment isn’t made by the date agreed will go a long way to helping this part of your business run a lot smoother.
Even taking these steps can’t guarantee that you won’t run into issues, and when that happens you’ll want to take an approach that is both firm, yet doesn’t run the risk of souring relations with a valued client or customer.
Step 1 – Keep It Friendly & Informal
The first step should be to issue a short, friendly reminder along with another copy of the invoice. Many times an unpaid bill can be a result of the client simply forgetting. We all know that running a business is time-consuming, and it’s easy to forget what needs paying on what date. Many times this will result in an apology and payment being made, which is the ideal outcome.
If payment isn’t made within a few days of the letter being delivered, a more direct approach may be required.
Step 2 – Be More Direct
Your second letter should be a bit more formal, and with directness replacing the friendly tone of the first notice you sent them. At this point, the failure to pay what is owed can’t be put down to forgetfulness.
Step 3 – Introduce The Threat Of Legal Action
If payment still isn’t forthcoming, you’re going to have to get tougher, laying out a set date by which payment must be made otherwise legal action may be the result. Usually, payment within seven days is a more than reasonable demand, giving the client time to read the letter and act upon it.
Step 4 – Issue A Final Notice
If the threat of legal action hasn’t prompted payment to be made, then you issue a final notice demanding payment and setting a date whereby legal proceedings will be launched against them.
One piece of advice that will prove valuable is to not lose your composure when writing these letters. It won’t do you any good to make empty threats, and in many cases, these threats can be used against you by the client.
Keep it professional, and to the point.
No one enjoys going through this procedure when dealing with a client who hasn’t paid what is owed. It can be emotionally draining, and also takes valuable time away from your business and other customers.
Usually, the best option is going directly to a reputable debt collection company who can take the stress and hassle away from you. They also have far more experience in these matters and know how to approach such clients in a manner that will see a speedy and satisfying result.
All you can do is try to be as fair and as reasonable as possible.
Are you claiming debts from individuals or sole traders?
More about the Pre-Action Protocol for Debt Claims
Let’s be honest; no one really enjoys invoicing. It’s monotonous and takes up time that you could be spending on other aspects of your business.
But, it’s a necessity. And if you have to do it, you’d better do it correctly, as it’ll save you headaches later on down the line.
In many instances, a business chasing a client who isn’t returning calls, or even having to go down the route of issuing a late payment demand could have avoided the situation by taking a little more time on their invoicing procedure.
This checklist will provide you with a solid base to ensure that your invoicing goes as smoothly as possible.
Check you’ve included all of the relevant information on your invoice
You’d be surprised at the number of businesses that put very little thought into the information they provide on their invoices.
First of all, make sure that the word “invoice” is clearly displayed on the documentation that you send them. That may sound pretty self-explanatory, but it can be easy to get so caught up in the numbers and payment terms that you don’t include the word on the document.
Double check your own company name, address and contact information, and be sure to issue a unique reference number on every invoice you send out.
Clearly describe the services or goods that you’re invoicing the client for, as well as displaying the date, the amount owed and the date payment has to be made by.
Keep on top of the situation
Don’t just create an invoice, send it out and then forget about it until the day of expected payment. If you’ve forgotten about it, there’s a good chance your client may have as well.
Send out the invoice, and then follow up five or so working days before the due date with a nice little email reminding your client that payment is almost due.
Sometimes a friendly reminder beforehand allows for a bit of planning on your client’s end. Let’s face it, people get busy, and sometimes it’s easy to lose track of the days or get swamped with work.
Create payment terms, and stick to them
Your invoice should include your payment terms written clearly and in an easy to understand way. When you indicate a specific number of days before payment becomes overdue be sure to specify if you mean business days, and don’t be afraid to be firm when it comes to enforcing the terms of payment.
Politeness and patience can go a long way when dealing with customers and clients, but there will be occasions where you have to be firm and to the point.
Sometimes, no matter how much you put into creating a perfect invoice, you’ll come across a customer who simply doesn’t want to pay.
When that happens, you could be left with no other option than legal recourse.
Did you accidentally overpay a former employee?
Most companies simply don’t have the resources or time to chase overdue payments, and it’s at this stage that a reputable debt collection company can be worth their weight in gold.
Are you claiming debts from individuals or sole traders?
Watch the video!
More about the Pre-Action Protocol for Debt Claims
As any company knows, late payments can have a devastating effect on operational functions. Whilst businesses must receive payment in full in order to remain profitable, they must also receive the funds in a timely manner to ensure that they can continue to operate.
Business debt collection can be complicated. In addition to implementing the relevant late payment laws, companies must find a way to encourage clients to pay their debts in full, rather than accepting a partial or token payment.
However, there are methods which can enable you to recover your business debts satisfactorily. A winding up petition, for example, requests that the courts close a business if it cannot pay its debts.
Providing you are owed £750 or more and the company is genuinely unable to make the payments, a winding up petition can result in the company being closed, its assets being sold and the subsequent money can then be passed on to creditors.
How Else Can A Business Recover Debts?
If the business in question is simply refusing to pay an invoice, rather than being unable to pay their debts, then a winding up petition won’t be a suitable solution. Instead, you may need to consider an alternative form of debt recovery.
A letter before action or a solicitor’s letter could be used to show your intention to take the matter to court unless it is resolved. Whilst you may not want to resort to litigation, taking a strong stance against late payments could ensure that the debt is paid quickly.
If the dispute is on-going, you may consider referring the matter to an arbitrator where a neutral third party will make a decision about the matter. There will need to be an arbitration clause in the contract or the parties will need to agree to arbitrate. If the matter is resolved via arbitration, an award will be made and the client must adhere to the ruling. As a form of alternative dispute resolution, arbitration can be used instead of going to court and it’s often a quicker and cheaper way to recover your debts.
Enforcing Debt Recovery
UK and international debt recovery can be time-consuming for businesses. With various debt collection options available, it may be difficult to determine which method of debt resolution is the most appropriate in any given circumstance.
Instead of increasing organisational costs by managing these issues in-house, you may want to consider accessing professional help. By outsourcing your debt recovery, you can ensure that clients adhere to their contractual terms and that your business doesn’t suffer as a result of late payments and debts.