As a business, you have a lot to keep on top of, and late payments shouldn’t be one of them. However, the majority of commercial companies are faced with late paying customers or clients every once in a while. Knowing how to handle them is key to ensuring that you eventually get the money that’s rightfully yours.
What is Classed as a Late Payment?
A payment is usually considered to be late 30 days if it’s still unpaid 30 days after the due date. However, you might have specific payment terms that your debtor has agreed to, and so some payments are considered to be late sooner or later than this. When a payment is late, you can take steps towards recovering your money.
One of the first things you can do is add on interest, which charges debtors a fee for paying late. The later the payment is and the longer things go unpaid, the more interest they will be charged. This can help to deter people from paying late. Charging interest can help to cover the costs associated with chasing a late payment. For example, the cost of sending letters and trying to track the payment down, and the time spent handling the administration side of things.
It’s also important to remember that you can recoup historic costs for late payments. Thanks to the Late Payment of Commercial Debts (Interest) Act 1998, you can recover history interest and compensation from late paying clients. You can recover costs from relevant invoices over the last six years.
Commercial Late Payment Recovery Process
There are a number of steps that make up the commercial late payment recovery process, and a debtor has multiple opportunities to pay. The longer they go without paying, the more ‘severe’ the payment recovery process becomes. Eventually, a simple warning is not enough, and you might need to start legal proceedings.
If your attempts at getting a debtor to pay have failed, you can start the late payment recovery process. This begins with a Letter Before Action, which is a formal notice to inform the debtor that you intend to take legal action against them. This is one of the final chances for them to pay, and it’s enough to convince a lot of debtors to pay what they owe.
Of course, some people ignore Letters Before Action, and this is when legal proceedings can begin. This involves taking your debtor to a small claims court, and having the court determine what they must pay and when. A CCJ (County Court Judgement) is usually issued, which sets out the terms of the repayment agreement.
However, handling late payments of commercial debts via the courts can be stressful, time consuming and it’s often unsuccessful. This is why it’s usually better to speak to a debt recovery agency. At Cobra Financial, we have what it takes to handle late payments of commercial debts.
