Recovering Overdue Amounts
Charging Interest
Once payment becomes overdue, you may charge interest at the Bank of England base rate plus 8 per cent. The interest must be calculated on a daily basis for each day payment is overdue. If you are to charge interest, notify the customer in writing enclosing a copy of your Terms and Conditions showing their signed acceptance. (See Credit Policy section.)
Telephone Debt Collection
The phone is the most effective debt-collection tool. If payments are overdue, call them first and be firm but not hostile. Try to establish a contact within your customers accounts-payable department and speak to this person directly.
Telephone late payers one week after the payment is due asking why the money has not been received and keep a written log of all your calls, along with the customer response. If a customer makes an excuse, ask them when you can expect to be paid. If a customer says the "cheque is in the post", ask for the cheque number. If the amount owed is sufficiently large, offer to pick the cheque up from their premises.
Letters
Many Companies use a series of standard letters with escalating levels of threat depending on the age of the debt. These letters should be sent out at set intervals, say one week, two weeks and four weeks after the invoice due date.
Debt Collection Agency
If you are still not making progress, consider using a debt collection agency. The commission charged is usually 8-10%, these costs are not usually reclaimable from the debtor.
Legal Action
If legal action seems likely, send a Letter of Claim. This commences the legal process. The letter should say that you plan to sue if overdue bills are not settled by a fixed date (usually 10 days). Unless you debtor is determined to face you in court, they are likely to make payment.
After this stage, you may take legal action. You may make a small claim at a County Court for any amount up to £5000. You should represent yourself and expect to pay a claim fee of £20 to £200.
For larger claims, seek legal advice.