They say that prevention is better than cure, so in this context it would be better if the small organisation and large organisation have agreed a late payment section in their contracts, so that both parties know about the risks of delaying payments beyond the final date for payment. But if such a section is not written into the contract then at least for the small organisation, help is available in the form of the “Late Payment of Commercial Debts (Interest) Act 2002”. This legislation firstly sets out a date by which the bill should be paid as 30 days from presentation of the bill for services provided, or 30 days from delivery in the case of the supply of goods. The small organisation has the option to demand a single fee as some recompense for the Debt collection activity undertaken and also to charge daily interest on the unpaid debt balance. The rate of interest is controlled by the date by which the debt becomes overdue, where debts that become overdue between January 1st and June 30th the rate is 8% over the Bank of England base rate as on December 31st of the previous year. For debts that become overdue between July 1st and December 31st, the rate is 8% over the base rate on June 30th. The single fee is fixed and is decided by the value of the debt as follows:
For debts less than £1000, the charge is £40
£1000 to less than £10,000, the charge is £70
£10,000 and over, the charge is £100
This fee may be only be charged once for a given debt, and it must be made clear that both of the charges that can be claimed from the legislation are not mandatory. The legislation also says that if the contract between small organisation and large organisation does contain a late payments section then the legislation does not apply, provided that the section provides adequate recompense for the small organisation.
Where a solid working relationship exists and the small organisation does not want to take the risk of losing future work from the larger organisation, they would be advised to get in touch with the large organisation first and try and be informed why the bill is still unpaid, only using the legislationif they do not get a satisfactory response. Before they do apply the charges they are best seeking advice, either paying for it by going to see a solicitor, or getting it for free from Business Link so that the small organisation can have confidence in what to do next.
The next steps to take in case the bill remains unpaid, even in part come down to three options in reality; a solicitor who specialises in Debt collection, an established Debt collection company and Debt collection software where by the small organisation takes the Debt collection operation in house. Whichever route is taken there may well be some degree of success in getting the bill paid, via Debt collection letters, but the first two options come with charges that might be significant, whereas Debt collection software can cost under £100. The Debt collection software packages must be inspected to ensure they have the right modules and content, such as recording of key activities, generation of meaningful reports and most important of all, easy ways of creating good Debt collection letters, which are at the heart of the Debt collection operation and also in keeping the professional and ethical standing of the small organisation. The Debt collection software should provide examples or templates for the user to use to writetheir specific Debt collection letters and also there should be explanation of the legislation and how the Debt collection operation works in practice.
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