Tips to improve cash flow in difficult trading conditions
August 25, 2009
The following are some tips to help persuade your customers to pay their debts.
* Get your solicitor to write a letter before action (LBA)
A Letter Before Action is really a written warning to your debtor of the action you are prepared to take if your debt is not paid. The letter will normally imply that court proceedings will be issued and costs and interest (see below) added to the debt. Involving a solicitor will incur cost, but the reality is that debtors take a solicitors letter more seriously where they may ignore a threatening letter written simply on your company’s letter head.
* Include interest in your claim
It is largely unknown that in 1998, the UK government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. This is known as the Late Payment of Commercial Debts (interest) Act. If you do not already have provisions for adding interest in your standard payment terms, you can add such under this legislation. Your calculation of interest should be included in any letter before action that you send to debtors. Read more