Partner Article

Latest analysis from Lovetts shows invoice payment still being neglected despite business improvement

Q3 2013 SEES 30% INCREASE IN LATE PAYMENTS CHASED BY BUSINESSES

www.Lovetts.co.uk

Following recent news from the FPB that business costs are rising 3.5% ahead of inflation,* data analysis from Lovetts PLC, the law firm specialising in commercial debt recovery, shows that businesses are also struggling to get back money owed to them by customers. The FPB research showed that late payments have had a detrimental effect on 81% of businesses, clearly demonstrating the size of this issue.

The latest analysis of Lovetts client transaction data shows that whilst trade appears to be improving for many, with evidence pointing to higher volumes of transactions, the number of overdue invoice payments being chased has also increased. The number of Letters Before Action Lovetts issued on behalf of its clients in Q3 2013 increased by a hugely significant 30.9% compared to the same period in 2012.

Charles Wilson, Chairman of Lovetts, comments: “It is encouraging to see that commerce is improving for many of our clients, but this improvement is being hindered by the failure to secure payment in a timely way, evidenced by the dramatic increase in number of debts we are chasing for our clients. Companies of all sizes are affected by late payment and this can force them into delaying making payments themselves. It’s a vicious circle of late payment which needs to be broken, and the best time to do this is at the outset of a new relationship or at the point of contract renewal when terms and conditions are reviewed.

“We always advise clients to stipulate clearly in their terms of business what will happen if and when an invoice becomes overdue, and to discuss this with their customers to ensure it is understood. This avoids any awkwardness and potential damage to the working relationship as all parties are clear on where they stand from the beginning. With times still tough for businesses, especially in light of the FPB research showing the increasing costs companies are facing for fuel, transport and marketing among other things, it is important that businesses do all they can to keep cash-flow moving efficiently.

“Implementing effective payment terms and enforcing these across the board is a relatively easy place to start and will also highlight any customers which are causing particular issues – remember if they’re not paying you for your goods or services, they’re not a customer!”

Lovetts’ 10 Tips to Tackle Late Payment

Make sure your customers know you want to get paid on time. Too many companies give wrong signals, by failing to check that their invoices have arrived safely and are on their customers’ ledgers. Keep the credit function properly resourced.

Tell customers early on, as part of good relationships, that legal action will be taken against non-payers. It doesn’t need to get personal at this stage, just clear.

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!

Use a Late Payment demand (LPD), not just a Letter before Action (LBA). It costs the same at Lovetts.

Use a draft Winding-Up demand for debts over £750 against companies, not just a letter! If you are worried about their financial stability, and need to move fast, consider investing in a letter enclosing a draft Winding-Up petition. It makes maximum impact straightaway. It carries the risk of public advertisement.

Make a call before you issue a Claim to remind them of the escalating costs in 3.

Make sure you tell your legal representatives to include your contractual costs, compensation and interest if you are entitled to them all.

After the Claim is issued, ask the debtor if they want to pay to avoid Judgment which will hit their credit rating. Over 50% will. Make sure you get all the costs in 3.

9. If any issues or disputes arise with your debtors, obtain fixed fee advice from a specialist solicitor before sending an LBA. The advice will give you a better understanding of your legal position and the strength of your case. It will also set out tactics to resolve the case and the likely costs of taking legal action before you get sucked in unnecessarily.

10. Remember – being tough this time might save you the bother next time.

ENDS

* Source: Forum of Private Business, November 2013: www.fpb.org/news/2645/Forum_research_suggests_business_costs_rising_3_5__ahead_of_inflation.htm

November 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 .