UK firms chase up debts and get tough on late payments

FIRMS are getting tougher more quickly with late payers, which are continuing to be a major drain on small business resources.

FIRMS are getting tougher more quickly with late payers, which are continuing to be a major drain on small business resources.

During 2011, the average time from invoice to the threat of legal action fell by 18.5 working days compared to 2010.

Previously, customers had around 100 days in which to pay up before the initial letter before legal action was issued but this has fallen to around 81.5 days, according to law firm Lovetts.

The firm also saw a 17% increase in the size of the average debt being chased, suggesting businesses are now focusing on the biggest debts which threaten their cashflow and therefore their survival.

Lovetts chairman and managing director Charles Wilson said: “2011 marked a turning point for UK businesses.

“As costs rose, confidence slumped and the eurozone crisis rumbled on, businesses have looked to shore up their defences and keep cashflow on an even keel.

“Certainly, many of the businesses we work with are taking a much tougher line on customers who pay late, implementing a robust policy of chasing debts for payments with the threat of legal action at a much earlier stage than we have ever seen before.

“The fact of the matter is that all businesses are looking to delay payment for as long as possible while putting on the pressure to be paid themselves. There’s no doubt, the customer who pays late is no longer king, they are a drain on cashflow.”

The Government is currently looking at how to tackle late payment but in the meantime, Mr Wilson said there were steps businesses could take to protect themselves during this difficult period.

“Checking out the credit history of a potential new customer is a good start, then stating quite clearly on your contract the terms of payment and policy for overdue payments,” he said. “For example, making a legal claim for the amount overdue and any interest payable on top of this, plus the legal costs incurred through chasing up the overdue payment.

“Most importantly, stick to your guns and enforce that policy.

“It’s all very well having strict terms in place, but if these are not followed through they will be ignored in future and the next invoice will go to the bottom of the pile.”

 

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