When a small company has been working on projects for a large company for several years and has had no difficulties in getting their bills paid on time, the current economic climate could cause difficulties for both small and large company alike, such as a lack of money available from the finance houses. This situation could cause the large company to slip a delay in settling some of their invoices and the loyal small company could get caught up in this, leading them to have to think of their next step.

The legislation that was brought in to help businesses such as the small company in this case to persuade the large company to pay the invoice is the “Late Payment of Commercial Debts (Interest) Act 2002”.

This legislation sets out certain criteria to be used in calculating the payments that are available for the small company to charge as follows.

a) Deadline for payment.
This could have been set up in a contract between both enterprises but if not then the legislation sets this as 30 days from either date of the supply of equipment, or the date an invoice was presented.

b) A one-off charge to compensate for Debt Collection work undertaken prior to implementing the legislation, 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 outstanding debt.
To make the Debt Collection process easier, the legislation allows Interest to be added on a daily basis at a rate of 8% on top of the Bank of England base rate, where if the debt becomes overdue on or before June 30th, the base rate at December 31st of the previous year is used and for debts that are overdue on or after July 1st, the base rate on June 30th will be used.

This legislation is only available where the contract between both enterprises has no late payment section, or if there is one but it provides lower benefits than the legislation. Although the small company has this legislation at their disposal, if they have developed a good working relationship with the larger company then they could feel it could harm them if they suddenly tell the larger company that they will implement it, so it would be best to make contact with them first and discuss it amicably with them.

Next comes the decision on how to implement the legislation, should the small company look for solicitors or Debt Collection businesses to hand the Debt Collection process over to, or should they take on the Debt Collection process with their available resources examining Debt Collection Software packages. If the small company thinks that this could be the only debt they will have to handle then they could just go down the solicitors or Debt Collection businesses route and pay the costs of some 8% to 10% or more of the debt value. If on the other hand they could think other debts will come up in the future and could be reluctant to always have to sacrifice the costs charged by the solicitors 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 centre of the Debt Collection process and while solicitors and Debt Collection businesses could be skilled in generating these, the Debt Collection Software package should provide a good on-lne help in generating Debt Collection Letters and to further help the users, examples should be included so that the users can base their Debt Collection Letters on these. The Debt Collection Letters examples within the Debt Collection Software should contain references and calculations related to the legislation. The Debt Collection Software should come with database functionality which would allow the details of the debt to be recorded and the examples for the Debt Collection Letters could reference the database fields and incorporate it into the actual Debt Collection Letters automatically. In this way the small company should be able to persuade the large company to pay the invoice from the use of good quality Debt Collection Letters.

Related posts:

1. The Finance Houses Refuse To help, A Small Organisation Needs A Larger Organisation To Pay A Late Account.
2. How Debt Collection Software Can Help A Small Business Save Money When They Discover That A Larger Business Has Not Cleared Their Latest Bill On Time.
3. Debt Collection For A Small Business With A Late Bill At A Large Business But Hoping To Preserve The Business Relationship.
4. Criteria For Examining Debt Collection Software For Use By A Small Company Having An Outstanding Invoice At A Large Company For Recent Projects Completed.
5. A Genuine Problem With A Late Invoice Or Is The Small Firm Being Manipulated As A Source Of Easy Credit?