For small organisations that are waiting to be paid for projects they have finished or products they have despatched to a larger enterprise, once the deadline for payment has passed they might need to mull over their Debt collection options.
The deadline for payment might have been set up in the original contracts between the two or more parties, if not then the “Late Payment of Commercial Debts (Interest) Act 2002” sets this as 30 days from either date of the supply of products, or the date an account was presented.
This legislation also permits the debtor to make a one-off charge to compensate for Debt collection work 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
To make the Debt collection procedure easier, the legislation permits Interest to be charged on a daily basis at a rate of 8% over the Bank of England base rate, where if the debt becomes late on or before June 30th, the base rate at December 31st of the previous year is used and for debts that are late on or after July 1st, the base rate on June 30th will be used.
Although the small enterprise has this legislation at their disposal, if they have developed a good working relationship with the larger enterprise then they might feel it could harm their reputation if they suddenly notify the larger enterprise that they will apply it.
They might prefer to take a more careful approach and perhaps take on a local solicitor who specialises in Debt collection and can be relied on to create suitably worded Debt collection letters to persuade the larger enterprise to settle the bill. They might approach a Debt collection company that might have been recommended, if not then they are well advised to do some research into any that they are thinking of using. If the small enterprise has had to handle Debt collection before and used one of these options they might wish to save on fees and try and do it themselves by ordering a Debt collection software system. It is vital that such a package includes a good set of instructions which explains the Debt collection procedure, the legislation, and the best way to create Debt collection letters that are in a professional and unemotional tone, to save that all important relationship with the larger enterprise.
With the do it yourself strategy the small enterprise has to realise that they need to undertake the record keeping part of Debt collection, something that might be done by a solicitor’s office or a Debt collection company, as part of their service. The Debt collection software should address this component in that it should use a database to store information, such as the details of the debt being claimed, copies of Debt collection letters that were composed and posted or emailed, scanned copies of documents received in the post, and any email conversations that take place. For phone calls, some Debt collection software might have a recording facility to store the call as a sound file, or perhaps speech recognition software that can generate a text copy, although this can be unreliable.
The record keeping is vital if the case the case goes to court so that the small enterprise can show what steps were taken in the Debt collection procedure prior to court, so any dubiously translated sound files might be thrown out. The Debt collection letters can be the key to a successful court case and so care must be taken with them.
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