In this blog, one of our senior solicitors specialising in Debt Recovery, Daria Stepien, gives you 5 tips to ensure you’re in a strong position to recover money that you’re owed.
1. Check the interest rate within your terms and conditions
Many businesses include a right to charge interest on late payments in their terms, and some will even include the interest rate to be charged. The interest rate applied is, more often, less than the interest rate you are entitled to recover under the Late Payment of Commercial Debts (Interest) Act 1998 (the Act), which is set at 8% above the Bank of England’s base rate.
The Act only applies to contracts between businesses, but under the County Court Act 1984 and Senior Courts Act 1981 you can charge interest at 8% (this is fixed so not above the base rate) when claiming against individuals.
Additionally, the Act allows you to recover fixed compensation for late payment from business customers, with the recoverable amount depending on the size of the debt.
There is no need to include the Act in your terms and conditions for it to apply. However, it is essential to remember your right to claim under it when seeking to recover debt. The interest and compensation needs to be claimed in the letter before action otherwise you cannot recover those amounts during court proceedings.
2. Administration Fees
Contacting customers with outstanding invoices and drafting letters takes some time. Therefore, it’s worth including a provision in your terms and conditions for the recovery of administrative and/or legal costs in the event of unpaid invoices. While the Act allows compensation to help cover some administrative expenses, these costs can often exceed what you are entitled to under the Act. By incorporating a carefully worded clause in your terms and conditions, you can ensure that your costs are covered.
3. Credit Limits
You may want to consider setting credit limits for customers, especially if they are a new customer or new business, or generally have a bad credit rating.
4. Act Fast: Time is of the Essence!
The longer a debt goes unpaid, the harder it becomes to collect. Late payments can quickly escalate into bad debts if left unchecked. Acting swiftly increases the likelihood of recovery. Set clear payment terms to include when payment is due, acceptable payment methods and consequences of late payment.
5. Remember the time limits
All debt recovery is subject to a limitation period, which is usually 6 years from the date the debt became outstanding for most debts.
Our Debt Recovery Package
If you’re spending too long chasing debts from your customer or you’re involved in a dispute regarding their unpaid bills, get in touch with one of the debt recovery lawyers at Talbots Law Coventry today on 0800 118 1500 or fill out our enquiry form below.
Disclaimer
The contents and 5 tips in this blog or any other published by Talbots Law cannot be considered as legal advice and should therefore not be acted on without prior consultation with a qualified solicitor or legal professional.