Businesses must sharpen up their payment terms, says Lovetts
Welcoming the long-awaited proposed changes to the County Court system published last Friday, debt recovery law firm Lovetts is urging businesses to tighten up their payment terms in readiness for the reforms coming into force in 2013. The proposed reforms will enable businesses to recover debts in a much more cost effective and time efficient manner provided they change their contractual terms.
Under the new system the small claims limit is set to rise to £10,000 and possibly £15,000 at a non-specified date in the future for B2B debt. All small claims under £5,000 will be automatically referred to mediation on the basis that this is not compulsory mediation, but rather a requirement to engage with a small claims mediator. In addition, the Government will streamline the procedures for obtaining Third Party Debt Orders and Charging Orders, as part of its efforts to ensure creditors receive what they are owed.
Charles Wilson, Chairman and Managing Director of Lovetts says, “At Lovetts we are dealing with thousands of commercial debts each month. Over the past year we have seen the average value of claims rise almost 19% as businesses focus on recovering the biggest debts through the legal system. These changes next year will enable businesses to pursue debts of smaller values with improved Court and Enforcement procedures. However, as the majority of commercial debts are under £10,000 businesses need to grasp the nettle and review their payment terms and conditions to ensure they have the right to recover any costs for recovery of debt along with interest and compensation.”
“The reforms will certainly benefit businesses who may previously have been nervous about the cost and time involved in pursuing claims through the legal system. However, too few businesses realise that the right to recover the cost of solving a dispute needs to be a fundamental aspect of a customer contract. It not only acts as a powerful disincentive to pay late, but should the money need to be recovered through the legal system, there is no cost to the innocent party. We welcome the reforms and urge businesses to ensure they can reap the benefits.”