Business N Finance

The government legislation covering the Late Payment of commercial debts was introduced in November 1998 and amended on August 7th 2002, which incorporated EU Directive 2000/35/EC on combating late payment in commercial transactions.
The idea of this legislation is to enable a creditor to impose a penalty on the debtor as well as the debt owed, as penalty for late payment. The penalty is dependant on the size of the debt as shown in the table below.

Size of unpaid debt Sum to be paid to the creditor
Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00

In addition to this, the creditor can likewise claim reasonable costs incurred in the Debt collection process and also interest on the debt. So, armed with this information, the creditor should be able to make a strong case for the debtor to settle the debt as soon as possible after the date for settlement has elapsed. This date ought totakes a credit period of 30 days, which could be seen as an interest free loan period by the debtor.

The creditor must decide on the best way to take care of this late payment problem, as the longer it goes on the more dear it can become, due to lower profit and possible climbing costs waiting to be charged against the debtor. The creditor must always take the first step of getting in touch with the debtor and courteously remind them that the invoice is unpaid and the final payment date has passed. If this fails to solicit payment then they will need to think on what further steps to increase the pressure on the debtor. It would be rather a mistake for the creditor to finish up with a steep bill for Debt collection because if the debtor finally ends up going into administration, the creditors may not be given their claims in full, so it is best to be cautious when working out the next steps.

The next steps include talking to a solicitor, talking to a Debt collection organisation or opting for a DIY approach by the use of Debt collection software that incorporates templates for the editing of Debt collection letters. The solicitor should be someone who specialises in Debt collection and can create good quality Debt collection letters on your behalf, but there will be a feeformal dealings with the debtors they have been successful with, as the creditor may wish to keep on good terms with the client in the hope of ensuring future contracts. The Debt collection organisations may set a charge based on the amount of the debt, or a set figure if the debt is below a starting value, so this can be expensive. For the DIY approach, the creditor should be able to work within the Debt collection software to edit the wording of the Debt collection letters to ensure that they are complying with this need. The templates for Debt collection letters should be supplied for all of the likely stages in the Debt collection process, and should contain references to the charges allowed by Late Payment of Commercial Debts legislation. The DIY approach should be the cheapest and the creditor must evaluate the various packages of Debt collection software to ensure that they meet the criteria set out above.

Quoting the legislation to a large debtor would be unlikely to antagonise them because being a large business they may have their own legal department, or an agreement with a legal practice and so should know about this legislation in order to collect their own debts efficiently.

Related posts:

1. Using The Late Payment Of Commercial Debts (Interest) Act 2002 For Debt Collection From A Valued Customer.
2. Are Lawyers And Debt Collection Firm The Only Solution For A Small Company Chasing Payment From A Large Company?
3. Is Legislation The Sole Avenue Of Convincing A Large Company Who Are Slow In Paying Accounts To Pay On Time?
4. How To Keep Hold Of A Customer Who Is A Late Payer Without Sacrificing The Income Of The Last Debt.
5. Employees Are A Firms Greatest Asset. Is This True For Debt Collection When Chasing A Large Company That Has Left The Latest Invoice Late?