Could Government Legislation Help A Small Company Recover a Debt From a Large Company Which Is Late With A Payment?
The government legislation covering the Late Payment of commercial debts was introduced in November 1998 and amended on August 7th 2002, which incorporated EU Directive 2000/35/EC on combating late payment in commercial transactions.
The point of this legislation is to allow a creditor to set a charge on the debtor as well as the debt owed, as penalty for late payment. The charge depends on the amount of the debt as shown in the table below.
Size of unpaid debt Sum to be paid to the creditor
Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00
In addition to this, the creditor can similarly claim reasonable costs as accrued in the Debt collection process and also interest on the debt. So, armed with this information, the creditor can possibly make a viable case for the debtor to settle up as soon as possible after the date for payment has gone by. This date Without such a date the law assumes a credit period of 30 days, which may be taken as an interest free loan period on the part of the debtor.
The creditor has to decide on the best strategy to handle this late payment issue, as the longer it continues the more dear it can be, due to lower revenue and possible climbing costs waiting to be charged against the debtor. The creditor should always take the first step of getting in touch with the debtor and courteously remind them that the invoice is unpaid and the final payment date has already gone. If this fails to solicit payment then they will need to take into account what further steps to increase the pressure on the debtor. It would be rather ill judged for the creditor to finish up with a steep bill for Debt collection because if the debtor ends up entering into administration, the creditors may not receive their claims in full, so it is best to be careful when thinking about the next steps.
The next steps include consulting a solicitor, consulting a Debt collection organisation or choosing a DIY approach by the use of Debt collection software that has built in templates for the composition of Debt collection letters. The solicitor should be one that specialises in Debt collection and can draft good quality Debt collection letters on your behalf, but there will be a feeethical behaviour towards the debtors they have been successful with, as the creditor may wish to keep on good terms with the client in the hope of ensuring future work. The Debt collection companies may set a cost based on the amount of the debt, or a set figure if the debt is below a starting value, so this can be expensive. For the DIY approach, the creditor should be able to work within the Debt collection software to edit the wording of the Debt collection letters to ensure that they are fulfilling this need. The templates for Debt collection letters should be included for all of the likely stages in the Debt collection process, and should contain references to the charges allowed by Late Payment of Commercial Debts legislation. The DIY approach should be the cheapest and the creditor must assess the various packages of Debt collection software to ensure that they meet the criteria set out above.
Quoting the legislation to a large debtor would be unlikely to antagonise them because being a large company they may have their own legal department, or an agreement with a legal practice and so should be aware of this legislation in order to collect their own debts efficiently.



