Payment periods of up to 180 days are putting immense pressure on firms across the UK but perhaps spurred by the shock of some of the UK’s most well-known brands going to the wall over the past year, businesses are becoming seriously tenacious in the pursuit of large, unpaid debts according to Lovetts.
In Q4 2012, Lovetts saw the total value debt being chased through a Letter Before Action jump by 21 percent compared to Q4 2011 as businesses took decisive action to get their big bills paid. A letter before action issued by a solicitor is used to prompt payment prior to legal action and works in eight out of 10 cases.
In addition, the average value of Court claims issued rose significantly and the total value of Court claims rose 34% demonstrating that businesses are only too aware of the dire consequences of large debts on their cash flow and are taking a no holds barred approach to pursuing these debts.
In another clear sign that businesses are not simply standing by while customers sit on their cash, the total number of days between Invoice and Letter Before Action fell by nine days and the time from LBA to a legal claim for payment fell by six days in the last quarter of 2012 – from 25 days in Q4 2011 to just 18 days in Q4 2012. Firms were therefore acting a total of 15 days sooner on unpaid debts than in Q4 2011.
Charles Wilson, Managing Director of Lovetts says clearly the trend is going in the right direction, with companies hot on the heels of late payers by focusing on their collection process and passing out more debt value for collection:
“Lay out payment expectations at the start of any new commercial relationship or project and then act on late payments, taking steps to limit the impact of unpaid debt. This way the power is in your hands rather than completely in the hands of your customer.”