In the continuing fragility of the economic climate, late payments can be a serious threat to businesses; especially SME’s who depend on prompt payment to retain cashflow. Statistics show that companies in the North West are paying bills 37 days late on average, over a week longer than anywhere else within the UK. Reportedly, the situation is getting worse as businesses try to stretch out the amount of time until they have to pay their bills.
Late payment is not only detrimental to the invoicing company, but can also have a knock-on effect, meaning that their suppliers then have to wait longer for payment; the whole scenario quickly becoming a vicious circle.
In the majority of circumstances where outstanding debts have accumulated, company directors are often unwilling to take forceful action to encourage payment in the interests of preserving a good working relationship with their customers for the benefit of future business. A ‘friendly’ approach to chasing late payment is always the first port of call in these cases – phoning up the customer and asking if there is a problem or a reason for the delay in payment can result in the desired effect. Business owners may need to be flexible and agree to payment by instalments, but the aim of the conversation should always be to reach an agreed time by which payment should be made. There may come a point whereby a supplier should ask themselves whether a client/customer who is unreliable when it comes to making payment is one they might actually be better off without.
Where late payments are becoming a regular occurrence, or pose a threat to the cash flow of the business, there is little option for business owners but to look at more formal action. Instructing a solicitor to write to the debtor requesting that payment be made can be effective. Following this, the next stage is to initiate legal action, such as court proceedings, issuing a statutory demand or even going so far as to starting insolvency/bankruptcy proceedings by issue of a winding up petition. Taking formal legal action to recover a debt is a big decision, and should not be entered into without consulting a debt recovery solicitor, who will be able to advise you as to the most appropriate course of action.
If you need any advice on how to approach debt recovery, or indeed are struggling to obtain payment and are looking to initiate legal action, please do get in touch with myself or one of our debt recovery solicitors.
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