Invoicing

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

Hunter Ruthven | 12 August 2015 | 9 years ago

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.

Higgins also suggested that while initiatives such as the ban on anti-invoice finance terms should be welcomed, this kind of funding option is not always right for some companies and actually won’t be of benefit till next year.

To bring about a culture change in late payment, FTSE 100 software company Sage recently launched a its Late Payments Manifesto? and an e-petition in the hope that attention can be brought to the issue of late payment.

The company cited research suggesting 68 per cent of small business owners have to wait for 60 days or more for payment, with more than half not getting money owed until after 90 days.

Topic

Invoicing

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