Lovetts response to latest initiative to stamp out late payment
For roughly the cost a coffee or daily newspaper, firms struggling with late payment can instruct a solicitor to issue a Letter Before Action and have an 84% chance of being paid, according to new data from Lovetts, the commercial debt recovery law firm. Responding to the invoice financing reforms, which may only benefit a small number of businesses, Lovetts is urging firms struggling with cash flow to use the low cost tools already available to them to tackle late payment at an early stage.
A Letter Before Action (LBA) is a formal letter which sets out what is owed and gives the customer a set time period in which to pay. A new service from Lovetts means clients can opt to issue an email LBA for as little as £1.50 plus VAT, putting the demand for payment straight into a company’s inbox. There is no minimum spend or commitment, making this a practical and cost-effective solution for SMEs.
Lovetts has analysed the success rate of the Letters Before Action it has issued on behalf of Clients over the past year and found that 84% of cases settle at the letter before action stage. Despite this, businesses are still slow to take action against late payers. Lovetts has found that on average, businesses are waiting 64 days from the date the invoice is due before sending a letter before action.
Michael Higgins, MD of Lovetts said: “Any initiatives to cut red tape such as the ban on anti-invoice finance terms in contracts should be welcomed. However, invoice financing is not always right for many businesses and those that will benefit need to wait until next year before the reforms become effective. The fact is there are positive, low cost steps businesses can take right now to improve their cashflow when dealing with late paying customers. Email LBAs start at just £1.50 for example. With an 84% success rate it’s worth a punt.
“In some cases we have found that debtors intentionally wait until they receive a Solicitors letter before they make payment therefore, taking action quicker is vital to cashflow. While we understand the reluctance some firms may have enlisting the services of a solicitor and how this might be perceived by their customers, in the 22 years we have been in business, we are not aware of any client who has lost a customer by taking this action.”