Oct 22 2010
Using Government Legislation To Persuade A Large Organisation That Is Late In Paying The Latest Bill From A Small Organisation.
When a small firm has been working on projects for a large firm for several years and has had no difficulties in getting their accounts paid on time, the current financial downturn may cause difficulties for both small and large firm alike, such as a lack of money available from the banks. This situation may cause the large firm to introduce a delay in completing some of their invoices and the loyal small firm may get caught up in this, leading them to have to think of their next move.
The law that was brought in to help businesses such as the small firm in this case to get the large firm to pay the bill is the “Late Payment of Commercial Debts (Interest) Act 2002”.
This law sets out certain criteria to be used in calculating the payments that are available for the small firm to charge as follows.
a) Deadline for payment.
This may have been set up in a contract between both firms but if not then the law sets this as 30 days from either date of the provision of goods, or the date an bill was presented.
b) A one-off charge to compensate for Debt Collection actions undertaken prior to taking advantage of the law, worked out 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
c) Daily interest on the unpaid debt.
To make the Debt Collection procedure easier, the law allows 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.
This law is only available where the contract between both firms has no late payment paragraph, or if there is one but it provides lower benefits than the law. Although the small firm has this law at their disposal, if they have developed a good working relationship with the larger firm then they may feel it could harm them if they suddenly tell the larger firm that they will implement it, so it would be best to speak with them first and discuss it amicably with them.
Next comes the decision on how to implement the law, should the small firm look for legal practices or Debt Collection businesses to hand the Debt Collection procedure over to, or should they take on the Debt Collection procedure internally looking at Debt Collection Software packages. If the small firm thinks that this may be the only debt they will have to take on then they may just go down the legal practices or Debt Collection businesses route and pay the charges of some 8% to 10% or more of the debt value. If on the other hand they may think other debts will come up in the future and may be reluctant to always have to sacrifice the charges charged by the legal practices or Debt Collection businesses and instead pay a one-off sum for a good Debt Collection Software package and use that for this and all future debts with little or no extra costs to pay.
Debt Collection Letters are at the core of the Debt Collection procedure and while legal practices and Debt Collection businesses may be skilled in writing these, the Debt Collection Software package should provide a good lesson in writing Debt Collection Letters and to further help the users, templates should be supplied so that the users can base their Debt Collection Letters on these. The Debt Collection Letters templates within the Debt Collection Software should contain references and calculations related to the law. The Debt Collection Software should include database functionality which would allow the details of the debt to be registered and the templates for the Debt Collection Letters could draw in the database information and incorporate it into the actual Debt Collection Letters automatically. In this way the small firm should be able to get the large firm to pay the bill from the use of good quality Debt Collection Letters.
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