How To Prevent Late Payment Of Commercial Debts
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In Birmingham, businesses of all sizes have to deal with clients that do not pay for goods and services.
Whilst it is normal for invoices to go unpaid, there are other excuses that businesses use to delay payment entirely.
Some of the most common reasons for late payment of commercial debts are:
- Financial difficulties have resulted in payment being put to the back of priorities.
- The client has forgotten to pay the invoice on the specified payment date.
- A dispute related to the invoice is made due to a mistake i.e. wrong address.
Although some excuses may be genuine, some clients may deliberately refuse to pay what is owed.
It is grossly unfair for commercial debts to be withheld from a sole trader or an organisation.
Enforcement action must be taken to ensure that unpaid invoices and fees are recovered quickly and effectively.
Most businesses will have a credit control team who have the job of chasing up any late payments.
Late payment of commercial debts can be detrimental to your business and may damage its longevity.
Cash flow is the lifeblood of all businesses and as a result, must be kept in a stable position.
It is clear that businesses of all sizes need a dedicated solution to help when money goes unpaid.
There are precautions that businesses can put in place to deter late payment of commercial debts.
Our experts have put together this guide to help businesses that are suffering from clients not adhering to payment terms.
Preventing Late Payment Of Commercial Debts
In order to stop the late payment of commercial debts, precautions need to be put in place by the business.
There are a multitude of ways to do this, which can be helpful for the recovery of any form of commercial debt.
Late Payment of Commercial Debts (Interest) Act 1998
The Late Payment of Commercial Debts (Interest) Act 1998 states that businesses can claim interest on overdue payments. This act extends to England, Scotland and Northern Ireland.
The threat of being charged more than is already owed is usually enough to get the debtor to pay.
The statutory interest rate that is charged on any late payments is the Bank of England base rate plus 8%.
Adding this interest to any unpaid fees may seem like a good idea, however, this may not guarantee a successful result.
Some debtors may simply refuse to pay what is owed, regardless of any legal proceedings that may be threatened.
Payment Terms
As part of a business transaction process, payment terms may be implemented to prevent late payments.
Payment terms are set out at the beginning of any project and document any costs, payment dates, terms and conditions of the work.
These usually state that payment should be made 14 days, 30 days, 60 days or 90 days after the invoice date. The length of time is commonly dictated by the strength of the relationship with the client.
This document is to be signed by both parties, which means the client cannot easily get out of not paying.
Monitor The Client’s Credit Rating
Before agreeing to work with a particular client, the credit rating of the business should be investigated.
This is a common practice in most credit control teams, as it determines whether the company is likely to pay or not.
If a client credit rating is green, this means they have a financial history of paying on time.
Checking the credit rating will eradicate the late payment of commercial debts in future.
Late Payment Of Commercial Debts – Birmingham
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Our recommended team of Debt Collection Experts are happy to help with your enquiries.
Commercial Debt Recovery – What Agency Should You Choose?
If the above precautions have failed to produce a payment, you will need to enforce stricter measures.
Whilst some people may threaten legal action by sending a letter before action, better methods are available.
When money is owed by businesses and public authority figures cannot help, we recommend using a debt recovery service.
Debt Collection Agencies have fast become the most popular method for the recovery of any late payments.
At Debt Collection Birmingham, we provide the easiest way for our clients to find the right agency for them.
Since 2006, we have put together a list of the best debt collection agencies in Birmingham.
Our recommended commercial debt collection agency is Federal Management, which has operated since 2004.
Across its long history, they have recovered millions of pounds worth of commercial debts yearly for their clients.
The success rates that they provide are the highest in the industry, with an average of 90% on all undisputed debts.
The service they provide maximises the recovery rate whilst minimising any costs that are involved.
They are authorised and regulated by the Financial Conduct Authority (FCA) to recover debts under the Consumer Credit Act.
Late Payment Of Commercial Debts – Birmingham
Speak to a debt collection expert
Our recommended team of Debt Collection Experts are happy to help with your enquiries.