Partner Article

Businesses Still Too Slack Over Late Payment, Says Lovetts

Businesses Still Too Slack Over Late Payment, Says Lovetts

H1 2013 vs H1 2012 data analysis shows late payers are given an extra month to pay

www.lovetts.co.uk

Following news of UK economic growth in Quarter 2 2013*, Lovetts plc, the debt recovery law firm, has revealed that rather than tightening their credit control processes to support financial recovery, businesses appear to have relaxed their attitude to late payment. Lovetts found that, compared to the first half of 2012, in the first half of 2013 businesses allowed their customers an extra 28 working days on top of their standard payment terms in which to pay, before they instructed a Letter Before Action (LBA) threatening legal action to recover the outstanding payment.

As a result, firms are now waiting an average of almost 4 months before they take the first steps to recover money owed for products and services. However, once the LBA had been issued the gloves effectively come off and Lovetts clients are following up with legal action an average of just over 20 working days after issuing the LBA.

Charles Wilson, CEO of Lovetts, commented: “It is encouraging to see that businesses are not making empty threats and do follow up and pursue their customers through the courts to get back money owed to them. However, it seems that firms have been keeping existing customers happy and do not want to risk damaging relationships, hence the long delay after issuing an invoice before chasing up the payment. Clearly, protecting business relationships is essential, but if the cost of that is affecting a company’s own cashflow it is not sustainable business practice – firms are effectively bank rolling their customers.

“A recent survey from the Forum of Private Businesses showed that late payment is causing greater concern for businesses in 2013 than it did in 2012**, with the percentage of respondents citing this concern rising from 33% to 38%. It is unsurprising that this is a big issue for businesses, particularly smaller firms with less stable cash flow, but the only way to improve late payment recovery is to act early in chasing up invoices and to show that late payment will not be tolerated.

“At Lovetts, we advise our clients to remind their customers of the payment date before it becomes due, to increase likelihood of payment on time. In order to keep a good credit control procedure in place, businesses must act early and show customers that they are serious about getting paid on time. The best way to do this, is to ensure that the debt recovery process, including recovery of legal fees and late payment compensation, are stated in the contract terms and conditions so there can be no misunderstanding.”

Lovetts’ 10 point plan to tackle late payment

At the outset make sure the customer understands that legitimate costs, compensation and interest will be claimed if late payment occurs – get it in your Ts and Cs Don’t be afraid; make sure they understand very clearly that this will form the basis of your trading relationship. Having done this: Invoice, and in the same month call or email to check the invoice has arrived with the right person to approve Focus on the usual suspects As soon as payment becomes overdue, call the customer to remind them that Late Payment compensation and interest are due on each invoice – give them the cost they could incur if they don’t pay up Make no bones about the fact these will be claimed if it goes to legal, then dangle a carrot and offer to waive compensation if immediate payment is made If it helps, explain that compensation is to pay the costs of running a credit control team If payment isn’t made, warn of the additional recovery and/or legal costs that will be due in addition to Late Payment compensation Go legal when you say you will. If you don’t act on your threat your invoices will always remain at the bottom of the pile Act decisively and it will change your business culture and your customer relationships while reducing late payment for your business

* Source: Office of National Statistics, 25th July http://www.ons.gov.uk/ons/dcp171778_319698.pdf

**survey conducted by FPB

http://www.fpb.org/news/2619/New_research_suggests_bank_charges_are_hurting_SMEs__says_Forum.htm

END

August 2013

Notes to Editors

Lovetts Plc is one of the UK’s leading law firms whose sole line of business is the recovery of overdue debts and any commercial litigation resulting from debtor/creditor agreements. Through this specialism and over 20 years in the debt collection industry, Lovetts has developed industry leading software for the efficient management and prompt recovery of debts, both in the UK and overseas. Lovetts was the first UK law firm to become a Public Limited Company, in 1994. For further press information please contact Jen Thorneywork or Alison Reeson at HSL on 0208 977 9132 or email lovettsteam@harrisonsadler.com

This was posted in Bdaily's Members' News section by Charles Wilson .