The number of days that a small company is prepared to let an invoice go unsettled may well have fallen. But there’s still much more room for one-person businesses to sharpen up when it comes to getting paid promptly.
That means it’s all well and good threatening legal action, writes Charles Wilson, managing director of debt recovery firm Lovetts , but you need to demonstrate that you will pursue a claim through the legal system, or you are in danger of crying wolf.
How NOT to cry wolf when demanding pay:
Start as you mean to go on
At the outset of any new commercial relationship, it is important to make absolutely clear that you expect clients to pay on time. Clearly stating in your Terms and Conditions how you will deal with any overdue payments will serve you well should you have cause to pursue a client for overdue payment at a later date. A specialist solicitor is best placed to offer advice on what to include and the best wording.
Have your LPD to hand
Making it more expensive for your debtor if they pay your invoices late is a very effective strategy. A Late Payment Demand (LPD) from your solicitor delivers a strong message about your intention to punish late payment and in 80% of cases can elicit a response or payment. An LPD is highly effective as it makes clear that legal action will be taken if the debt is not paid whilst also allowing the creditor to add interest and late payment compensation.
Don’t be shy on speaking up about the law
The fact is, however, that too many businesses still shy away from taking advantage of the Late Payment of Commercial Debts (Interest) Act 1998 despite being well within their rights to do so. For some, this reluctance is due to the delicate nature of the client and supplier relationship, particularly in the tough economic environment we are experiencing now.
It’s all in your terms, isn’t it?
But many businesses are missing out simply because it has not been stated in their Terms of Business that the full cost of any debt recovery activity necessary to secure overdue payments, will be added to the invoice.
It’s also important to make sure your Ts Cs apply to the contract and every transaction you carry out with the customer, by sending or referring to them just before the contract is signed and sealed. They should also be printed on the back of all quotations, making it clear that they will apply to any resulting order. Sending Ts and Cs with the invoice is too late.
Keep your word, and promises
Of course, no matter how clearly you set out any debt recovery activity or additional charges if payments are not made on time, clients will inevitably try their luck and delay payment for as long as they can . If you fail to follow through on your promises , even if that’s a promise of a follow-up phone call, they will soon realise you’re not serious about recovering your debts, and any subsequent letters will go to the bottom of the pile. So to protect your business, it is particularly important to follow your threats with the action you promised. The word will soon spread that you expect to be paid on time and this can help discourage late payers in the future.
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