According to Lovetts, businesses are facing a typical waiting time of four months from the date of invoice before taking legal action.
Charles Wilson, CEO of Lovetts says Most businesses will start chasing within the first month after the payment is due, when this doesnt elicit a response, they get tougher with phone calls, letters and emails. You can understand how the hours spent chasing can rack up.
“While we can understand the delicate nature of some customer/supplier relationships, patience is not a virtue when it comes to chasing payments and businesses need to show they mean business, much sooner.
The firm says that in 80 per cent of cases a Letter Before Action (LBA) or Late Payment Demand (LPD) prompts payment.
Wilson adds: We firmly believe the best way to tackle late payment is to make it clear, early on in the relationship that legal action will be taken against non-payers. It doesnt need to get personal at this stage, just clear.
As a matter of course, check invoices have arrived safely and are on the ledgers. This is basic housekeeping but too often falls down the priority list. If payment is not prompt, add up the costs of going legal early on i.e. interest, late payment compensation, indemnity costs under contract (make sure your T&Cs allow for this).
Then tell the customer what that figure is. Explain your reluctance to escalate costs unnecessarily. 1,200 debts can easily grow by 50%, and businesses owe it to their customer to point it out.
These actions will show customers that you won’t be a pushover and you will take action if you are not paid on time. At worst it will push you up the payment order at best it will prompt timely invoice payment both now and in the future.