Tax & admin · 12 August 2015

Why one short 1.50 letter could be the answer to late payment problems

Letter Before ActionAmongst much new legislation surround late payment, including removing limitations on using invoice finance from supplier contracts, it has emerged that 84 per cent of cases could be fixed for a little as the cost of a coffee.

Law firm Lovetts has come out and declared that simply getting a solicitor to issue a Letter Before Action can, in fact, result in more than four-fifths of late payment issues being resolved.

Micro businesses often have difficulty managing cash flow, with many problems in this space originating from having to wait months for payment from bigger companies.

A Letter Before Action is a formal letter setting out what is owed and the dates in which a customer has to pay. These can be issued by solicitors for as little as 1.50 letting late payers know that there are procedures in place.

Of the letters issued by Lovetts, situations have been resolved in 84 per cent of cases. Despite this, further research from the firm found some businesses are waiting 64 days from the date of invoice is due before sending one out.

Michael Higgins, MD of Lovetts, commented: In some cases we have found that debtors intentionally wait until they receive a solicitors? letter before they make payment therefore, taking action quicker is vital to cash flow.

while we understand the reluctance some firms may have enlisting the services of a solicitor, and how this might be perceived by their customers, in the 22 years we have been in business we are not aware of any client who has lost a customer by taking this action.



Hunter Ruthven was previously editor of Business Advice. He was also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs.