The debt recovery process normally begins with a request to the debtor for payment. This may simply require a letter. However, if the letter fails then the next step.
We frequently hear about the extent to which late payment is damaging UK businesses. While laws are in place, few take up their entitlement and so far, despite various ideas, suggestions and initiatives there’s been little change to the payment culture in the UK. But the tide appears to be turning – and FDs may be the key to it all.
FDs are all too well aware of the impact overdue invoices can have on cash flow, creating a vicious circle with firms paying late; in many instances because their own customers are paying late.
Although there is a great deal of focus on the impact this has on small businesses – that's certainly where the government is focusing its energy – almost every firm is affected in one way or another, even if it's just the fact that they have to pay people to chase payments day in, day out.
There is also the reputational cost to consider as the poor payment practices of big firms and imposition of unfair terms by some of the larger retailers are being exposed. But even this doesn't appear to be changing behaviours. The practice of paying late has become ingrained in business culture. It's no surprise then that efforts to change the culture has so far failed to yield any noticeable change.
The late payment legislation already in place to deter late payers is seriously underutilised (the Late Payment of Commercial Debts (Interest) Act 1998). Our own polling shows that suppliers are bankrolling their customers for an average of 95 days, from the point of issuing an invoice before they threaten legal action with a solicitor's letter before action (LBA) – the threat of taking the customer to court to enforce payment. This is a 7% increase compared with Q4 2014, when the average time from invoice to LBA was just 90 days.
The Department for Business, Innovation & Skills has started to take steps to assist businesses to arbitrate and mediate without recourse to the courts. A new small business conciliation service is to be launched to help settle disputes outside of court, along with a small business tsar who will put a special focus on this issue. Minister for small business, industry and enterprise Anna Soubry said recently they would tackle the power "imbalance" between small and large UK businesses.
It's a start, but with a very small proportion of invoice claims ending up in disputes, I fear this will not get to the root of the problem and change the payment culture we now have in the UK.
At the heart of the issue is afear of upsetting customers and damaging client relationships. Fundamentally (and quite reasonably) businesses don't want to rock the boat by taking a more robust approach and enlisting legal expertise to recover money owed.
STRIKING A BALANCE
While it's important to maintain good relationships with customers, a balance needs to be struck between acting in a way that could be interpreted as aggressive versus being too passive when it comes to enforcing your payment terms.
What's really needed is a change of mindset by business, not government.
First of all, stop thinking of the credit control function as a drain on resource – think of it as a part of the business that can make a financial contribution – almost a profit centre if you like, making best use of regulations introduced in 2013. These allow firms to claim interest and compensation plus reasonable costs of collecting the debt where these exceed the compensation. I have seen substantial companies all but pay for their credit control salaries from late payment compensation on invoices.
Not only that, if a past or current customer has consistently paid you late, you can recover compensation and interest retrospectively on every invoice paid late going back six years.
Although few businesses are aware of this six-year rule, a small but growing number of firms are now utilising the Act to take on late payers, past and present, recovering very significant sums to compensate them for the administrative and legal costs they have incurred chasing overdue invoices. They are turning their customers' poor payment performance into a business asset.
Compensation levels range from £40 for invoices up to £999.99, to £70 per invoice between £1,000 and £9,999.99, and £100 for invoices over £10,000. This is intended to cover the cost of your collections team.
I accept this is not going to win you any friends, and may even pose a threat to the client relationship – so start with ex customers first. If the market you operate in is quite niche you may find word will spread that your business has taken a stand and as a consequence your invoices reach the top of the pile for payment sooner than they may have done previously.
To take advantage of this legislation,all references to interest or other compensation need to be removed from your terms and conditions to allow the new legislative terms to bite.Provide the new terms to customers and confirm when they will come into effect. If you have a contractual clause allowing you to recover indemnity costs, you will also have a better chance of recovering costs if, exceptionally, you find yourself going legal.
Make it standard practice within the credit team to set out very clearly the sum that your customer will need to pay, in addition to the debt, in any letters chasing payment and on phone calls. It doesn't need to be aggressive; you are simply stating that in order to protect the financial viability of your business you will need to impose the costs stated unless payment is made by the date specified.
As soon as a payment is overdue you can claim the compensation, and interest in due course, but you may wish to waive this if payment is made immediately. Make sure that customers recognise this legal liability.
You can also claim the reasonable costs of recovering the debt as and when they are incurred. You don't issue an invoice for the interest, compensation or costs. You just write and tell your customer the amount due. It's as simple as that.
Firms with a good record of paying their customers within terms, but who have suffered at the hands of their customers who pay late, have the most to gain. Those that have paid late themselves could find they are on the receiving end of compensation claims and should be declaring this as a contingent liability.
The tide is slowly turning and FDs need to be prepared for claims against their businesses as well as consider the opportunities to make claims themselves. As awareness continues to grow, the implications for businesses from both an asset and liability perspective are huge, and could change the culture of payment in the UK for good.
FDs open to both the opportunities and the challenges provided by legislation will be best prepared as they see an increasing and inevitable trend for late payment itself to be marginalised.
[These are sample Letter to Company for Payment Reminder. You can follow these sample letter to customers and clients for recovery of payments of supplies or.
Categories: Debt, How to recover a debt (up to €15,000)
If you are owed an amount up to €15,000 you can use the debt recovery process overseen by the network of District Court offices to seek repayment from the debtor. If a demand letter fails it is open to a creditor to then send a 'claim notice'. This a court document and if it is ignored by the debtor a judgment can be registered against them. The claim notice document is available on LawOnline and we will guide you through its completion. If the debtor then ignores this claim notice LawOnline also provides the other three documents that you need to complete to apply for a judgment againts the debtor in the District Court office. This guide explains the steps involved and each step is cross-referenced to the required document on LawOnline.
The purpose of this guide is to explain the steps involved in recovering a debt of up to €15,000.
The reason for the limit of €15,000 is that this is the maximum amount that a creditor, i.e. the individual or entity owed the money, can recover using the debt recovery process which is managed by the offices of the District Court (for higher amounts the Circuit Court or High Court process would need to be used).
We also cross-reference each step in this guide to the required documents, all of which are available on LawOnline. Debt recovery using the District Court offices is relatively straightforward and LawOnline will guide you through each step.
The debt recovery process normally begins with a request to the debtor for payment. This may simply require a letter. However, if the letter fails then the next step is to ‘serve’ a claim notice on the debtor:
There are three possible outcomes as a result of serving the claim notice:
The claim notice informs the debtor that if they fail to respond to it and fail to pay the debt then the creditor is free to apply to the court for a judgment against them. The prospect of a court judgment being registered should hopefully be enough to persuade the debtor to now pay the outstanding money owed.
If not the creditor can then decide whether or not to apply for the judgment. There is no need for the creditor to actually attend court to get a judgment – this application is entirely written and requires a number of documents to be filed at the District Court office.
In the event that the debtor disputes the claim and decides to defend it the matter will need to go to a court hearing if it is to be resolved. In this situation the creditor can decide to go to court or to drop the matter.
There are time limits for taking most types of legal action. In general, the time limit for taking action for an outstanding debt is six years. This means that if a creditor does not start legal proceedings within six years of the debt being due, the action is ‘statute-barred’. Effectively, this means that, in these circumstances, a debtor cannot be forced to pay the debt.
This limitation is only relevant if the matter proceeds to a court hearing. These limits do not prevent a creditor from attempting to get payment from the debtor outside of a court hearing.
It is very important that care is exercised when determining the limitation period applicable. Once a legal action is commenced the clock stops in terms of the time limit left to take such an action.Back to top
The following are the steps involved in requesting payment of, and taking action to recover, an outstanding debt up to the value of €15,000. Each step is cross-referenced to the required documents, both of which are available on LawOnline.
The obvious first step in any recovery is to request payment by letter or a series of letters – see, as an example, Debt collection letters for an outstanding invoice. Should the matter end up in a court hearing it would also be supportive of a creditor’s case to have sent such a letter though there is no legal requirement to do so. Typically a final letter is sent giving the debtor seven days to pay before the next step is taken which is to start legal proceedings.
There are two bases on which the creditor can choose which District Court office to use:
The location of the debtor is often used given that this location is less likely to a disputed should the matter go to court hearing.
To ‘start legal proceedings’ basically means the process of preparing and giving a claim notice to the debtor – see Claim notice: debt not exceeding €15,000. Once the claim notice is drafted and signed it must be filed with a District Court office so that it can be issued.
Three copies, including the original signed version, are given to the court office where they are stamped, dated and a reference number is assigned called the record number. This process is referred to as issuing the claim notice. The office keeps the original signed version and returns the other two copies to the creditor.
A stamped and dated copy of the claim notice must now be given to the debtor – this is referred to as ‘serving’ or ‘service of’ the claim notice. This can be done via the postal system or be delivered in person. In the case of a company debtor it is acceptable to send it to the registered office by ordinary post. In the case of an individual registered post should be used or else it should be delivered by hand.
If, after following the above steps, a settlement is reached with debtor then the matter is ended.Back to top
If the debtor fails to respond to the claim notice not later than 28 days after receiving it, or replies without an intention to defend the claim but still fails to pay the outstanding amount, it is then open to the creditor to apply to the District Court for a judgment against the debtor.
The following are the steps involved.
The court office requires confirmation that the debtor actually received the claim notice. The details of how and where service of the claim notice was carried out are provided in the Statutory declaration of service document. This document must be signed in the presence of a commissioner for oaths or a practising solicitor – what is called ‘swearing’ the document. Most solicitors’ firms provide this service at a cost of around €10.
The court office also requires confirmation of the amount of the debt still outstanding. The Affidavit of debt document is used to provide this information, taking account of any part payments that the debtor may have made, and including any interest and recovery costs as appropriate. The affidavit of debt can only be prepared once 28 days have elapsed since the claim notice was served on the debtor. This document must also be signed in the presence of a commissioner for oaths or a practising solicitor.
This document - Judgment (decree) by default - is essentially the application for the judgment against the debtor for the total amount still outstanding. While it is signed by an officer of the court it must be drafted and provided by the creditor to the court office.
The above three documents have to filed at the District Court office. These documents and the claim notice together make up, what is called, the judgment set.
These documents are checked and, if all are in order, the District Court issues the judgment for the amount owed plus the costs involved in the proceedings. Having obtained the judgment, the creditor is entitled to enforce the judgment (see ‘Enforcing a judgment’ below). Interest at a rate of 8% per annum begins to accrue on the amount of the judgment from the day the judgment is given. A judgment where the debtor does not defend the claim is referred to as a summary judgment.Back to top
Every debtor has a right to defend a claim notice served on them. If this is their intention then the debtor is required, within 28 days of having received the claim notice, to notify the creditor, or their solicitor if legally represented, by providing what is called their ‘defence’.
The creditor, or their solicitor, will then need to review this document and reply to the debtor on any points if necessary. Once replies to any queries have been furnished, either party can apply to arrange the court hearing.
On the hearing date itself, both parties will be required to give evidence and then the creditor will be required to prove their case. For this reason, a creditor should always be satisfied that the claim being made is provable. Examples of the types of evidence of the debt required are order forms, invoices, delivery dockets signed by the debtor etc.
Before making a claim in court, however, it is important for a creditor to remember that:
The following are the relevant debt recovery documents available on LawOnline.
This is a letter that can be sent to the debtor when the creditor has decided to issue a claim notice and thus start the legal recovery process. There are other similar letters available on LawOnline which can also be used depending on the circumstances.
This document sets out the details of the claim including the amount owed. A business creditor owed money by another business can also include interest and any recovery costs incurred. Interest can also be included if it part of the terms of business or was a contractual condition of the transaction giving rise to the debt.
The purpose of this document is to confirm to the court office that the claim notice above was correctly and successfully served on the debtor. The details of how and when service was carried out are required. This document must be signed in the presence of a commissioner for oaths or a practising solicitor.
This document is required to confirm to the court office the remaining debt amount still outstanding, taking account of any payments that the debtor may have made, and including any interest and recovery costs as appropriate. This document must be signed in the presence of a commissioner for oaths or a practising solicitor.
This document is essentially the application for the judgment against the debtor for the total amount claimed. While this is signed by a court officer it has to be prepared by the creditor. Once signed by the County Registrar the creditor can then enforce this judgment (see the chapter on ‘Enforcing a judgment’).
Also all of the four above documents, i.e. excluding the letter, can be purchased together – see District Court claim document pack.Back to top
When judgment is obtained and the debtor still refuses to pay the outstanding debt, there are several methods of enforcement possible which may be initiated at any time within twelve years of the judgment. Some enforcement methods are only available against individual debtors, including sole traders, while others are only used against companies. The choice of enforcement option should ideally be based on the debtor’s specific circumstances.
The following methods can be used to enforce a debt judgement against either a corporate entity, i.e. a company, or individuals including sole traders:
a) Publication: A judgment can be registered in the Central Office of the High Court. This leads to the publication of the debtor’s name and the amount owed in trade gazettes. This could affect a debtor’s credit rating;
b) Execution by Sheriff: A creditor can lodge the judgment order with the Sheriff in the area where the debtor lives or conducts business, thus requesting the Sheriff to seize goods and to sell them for the purpose of raising money to satisfy the debt. Other enforcement options may require the court being satisfied that the Sheriff has been unable to execute the judgment in this way. Where it is not viable to seize goods, the Sheriff will often enter into instalment arrangements with debtors or seek a lump sum;
c) Judgment mortgages: A judgment mortgage can be registered when there is a judgment against a debtor owning land or property. When a judgment is registered as a mortgage, it results in two main consequences:
a. The debtor cannot sell the lands or property until the mortgage is discharged;
b. The creditor can enforce the judgment mortgage by seeking a court order to sell the property and settle the debt.
d) Garnishee orders: Where a third party owes money to the debtor, the court can make a further order directing the third party to pay the sums due directly to the creditor.
e) Receiver by way of equitable execution: Where money is due to be paid to the debtor at certain future dates e.g. rent, a court may appoint an independent person to receive the money payable to the debtor and pay the creditor.
f) Injunctions: An injunction is a court order directing a party to do or to refrain from doing something. A court judgment is not necessary to apply for an injunction which can be sought by a creditor in the following circumstances:
a. to prevent a debtor from disposing of or reducing assets below a certain value to avoid paying a debt
b. to prevent the debtor leaving the jurisdiction
c. to prevent destruction or removal of evidence and used also to force the debtor to disclose the whereabouts of specific documents or items
Judgment enforcement methods specific to corporate entities are as follows:
a) Examination of directors: Officers of the company can be examined before the court to assist in discovery and execution of the judgment. Any officer may be examined as to the assets of the company;
b) Liquidation: When a company is unable to pay its debts it is insolvent and a number of events may follow including voluntary or compulsory liquidation. The process of liquidation involves the sale or collection of all assets and distribution of any net proceeds (after deduction all costs) to creditors in order of priority, followed by the dissolution of the company.
Judgment enforcement methods specific to individuals, including sole traders, are as follows:
a) Examination order: A debtor is served with a summons requiring the completion of a statement of means and to attend court to be cross examined. At the examination hearing, a Judge can make an instalment order (see below). If the debtor refuses to attend court, the judge may award an instalment order in his or her absence.
b) Instalment order: An instalment order compels a debtor to repay by instalments the amount of the debt and legal costs which are due. If the debtor fails to comply with the order, then a committal order (see below) can be sought from the court.
c) Committal order: This is an order which directs that the debtor be arrested and committed to prison for contempt of court for failure to comply with the terms of an instalment order. Typically, to secure such an order, the creditor would need to show that the debtor will not, as opposed to cannot, pay.
d) Bankruptcy order: Bankruptcy is a legal process for the benefit of creditors where the debtor is unable or unwilling to discharge his debts. To begin this enforcement action, the debtor must have committed an act of bankruptcy (e.g. a judgment returned by the Sheriff marked “No Goods/Nulla Bona” is an act of bankruptcy). Where a debtor is adjudicated a bankrupt by the High Court, the property of the debtor becomes vested in the Official Assignee (an officer of the High Court). The result is that the bankrupt loses his/her capacity to deal with the property. The debtor’s property is then sold for the benefit of the creditors. Given the maximum debt amount handled by the District Court this unlikely to be an economically feasible route.Back to top
Late payment letter, Payment reminder letter and Overdue payment letter, First debt recovery letter.
Make sure you follow the right first step in order to recover a debt that is owing to you or your organisation with a debt recovery letter. By using a payment reminder letter you can feel assured you that you have formally reminded your client or customer to make payment. This reminder letter details all the necessary information from the date the debt is owing to whether interest will be payable to even the threat of further action if the debt is not paid.
Use this letter:
This late payment letter covers:
A debt recovery letter or late payment letter is a letter to remind your client or customer that they owe you or your organisation. It sets out the details of the debt such as the date the debt owing should have been paid, whether interest is payable in the debt and a reminder that if the payment is not settled a legal action may follow.
You need this letter when your client or customer is late with a payment and you want to commence a formal procedure for collection of debt. This letter will remind your customer to pay the debt, and ensure that your debtor knows the consequences of not settling the payment. These include late payment interest charges (if it is a business transaction) and/or a threat of legal action.
You can use this letter to start a debt recovery process from both individuals and organisations whether in course of business or not. Where there is no contractual interest, you can only charge an interest on late payments if it's a business to business transaction and statutory interest applies. Statutory interest is 8% plus the Bank of England base rate and may be subject to changes. You cannot claim statutory interest if your customer is consumer and not acting in the course of business. In such scenarios, you can only claim interest if the contract sets a contractual rate, i.e. late payment rate specified in the contract.
You should request your debtor to arrange the payment as soon as possible or on the same date. You can offer in this letter the debtor the option of making an alternative payment arrangement. An alternative payment arrangement is a repayment agreement with your debtor in regular fixed instalments.
Ask a lawyer for:
The debt recovery process normally begins with a request to the debtor for payment. This may simply require a letter. However, if the letter fails then the next step.
Payment reminder letters are not very easy to write and require a lot of thought to be put into them. You have to choose your words in a way that will not jeopardize your relationships with your client. You also have to consider the importance of the money involved and have to convey the same in a way that ensures that the client makes the payment quickly. You can also credit collection templates.
To rid you of these worries, we have brought to you simple payment reminder letter templates. These templates can be easily used to form reminder Letter of Intent without you having to spent time in writing a detailed letter on your own.
Size: A4, US
This payment reminder template is written in a very friendly and polite manner and will help you in conveying your message to the defaulter in a polite manner. It is an email template wherein you have to write the email Ids of those you want the letter sent to, the name of the defaulter, date of the invoice along with its number and amount and your name and title as well. You can also see Business Letter Template.
This payment reminder template contains 4 letter templates which are written in very strong tone and are recommended in situations where the payment deadline has been exceeded by a large time period or the amount is very high. It contains courtesy letters as well as those which threaten legal action against the defaulter. The name and address of the debtor has to be filled along with the amount of debt, duration it has been overdue for and period it is applicable for. You may also see Collection Letter Templates.
This payment reminder letter template is best suited in a situation where a tenant hasn’t paid his debt and is nearing or has exceeded the deadline for payment. It contains two templates which should be used dependant on the time period between the due date and the date of the letter. The language is neither too lenient nor too harsh and thus will benefit the landlord in keeping a good relationship with their tenant. The name and address of the tenant and landlord along with the value of rent overdue and the deadline should be mentioned in the letter. You may also see Client Letters.
This payment reminder letter template is very generic and can be used in multiple situations where a person or an organisation has to receive payment from another and the debtor has violated the deadlines. It is written in a very polite tone and will help in keeping a healthy relationship between both parties. It requires the name and address of the debtor to be filled along with nature and amount of debt and the number of days it is overdue. You may also see Legal Letter Templates.
This payment reminder letter template is not very specific and can be used in any situation where a company has to collect money from another and where there is no provision for any extensions of credit in the contract between the two. It is written in a very assertive but respectful manner. The amount of debt, date of deadline along with details of the creditor have to be mentioned in the sample letters.
Most payment reminder templates are very easy and straightforward to use with clear instructions given on how to use them. Most of the statements written can be directly used and only some information, which is unique to every situation, has to be filled by you. First, you have to enter the details of the defaulter which includes their name, address and other contact information.
Then you write the details of the debt, its amount, nature, time period it is applicable for and days it is overdue by. Then you have to write the payees details, name, and address and contact information (if required in the template). You can also see Resignation Letter Template.
The given payment reminder templates can be used by any two parties between whom transaction of money is overdue and where there is a prior contract which clearly states the possible actions that can be taken by the payee in such situations. The contract is necessary as it forms the legal basis of sending the letter.
If you are a property owner and your tenant has not paid their rent on time, then you can use these payment reminder templates to either give them a reminder or send an eviction notice in extreme cases. You can also use this if your business is to receive a certain amount from another but they have failed to do so in time. You may also see Marketing Letter Templates.
Writing a reminder letter is not an easy task. There are many factors you have to consider. You have to make sure that you appropriately convey the importance of the money involved for you but you also have to consider the kind of relationship you want to maintain with the defaulter. Keeping all this in mind, you have to carefully choose your words and construct your sentences.
Being extremely aggressive can jeopardize your business but too much politeness may not fasten the process of recovery of payment. Payment reminder letter templates solve all these problems of yours.
Since all the statements are adequately formed with appropriate choice of words, all you have to do is fill data relevant to your situation and in no time and with minimum effort, you get your own payment reminder letter. You may also see Appeal Letter Template.
Now that you have all the important information related to payment reminder letters, you may choose the template that best fits your situation and create your own reminder letter without much effort. Eviction letter templates should be used in extreme cases where the overdue date has long passed. All the templates have been taken from reliable sources and can be readily used.
To avoid spending valuable time and effort chasing late payments you should consider having collection letter templates ready to use and a timing process for.