If A Large Business, Who Had Taken On A Small Business To Do Projects For Them And Then Delayed In Settling The Account, How Can The Small Business Chase The Debt Without Destroying The Business Relationship?
In this kind of situation the small organisation might well feel that they are in a difficult stance, especially if this is their first contract with the large organisation and they hope for more work from them. In this case the working relationship might well be at an early stage, where trust is an important component, even if the small organisation had done the required work to a top and acceptable standard, this is only the first work they have undertaken for the large organisation. It may be a mistake to pre-empt the situation and go right into Debt collection, either by getting hold of a solicitor who specialises in Debt collection, by going to a Debt collection organisation direct or by choosing a do it yourself strategy by using Debt collection software. A far better first move may be to get in touch with someone in the accounts department of the larger organisation and ask if there is any logical reason why payment has been delayed. The next stage should be to read through the contract that was set up for the work and see if it includes a section to cover late payments, if so then this can be enforced as it will have been agreed when the contract was signed and should not cause bad feeling. If there is no late payment section then the “Late Payment of Commercial Debts (Interest) Act 2002” comes into use.
In this act the final date for payment of bills for work done is 30 days after the invoice was presented. If payment is not completed then the small organisation has the legal right to apply a one-off set charge as some reward for the work undertaken in the Debt collection operation; however this is a fixed charge based on the value of the debt rather than an actual figure for the cost of initial Debt collection work. The small organisation can also apply interest on a daily basis on the remaining debt at a rate of 8% over the Bank of England base rate. For debts that became overdue between, January 1st and June 30th the base rate at the preceding December 31st is used and for debts after July 1st, the base rate at June 31st is used.
If the small organisation has made little progress by speaking to the accounts department then they might be advised to escalate the problem and use one of the [methods identified earlier. Their decision as to which is best could be based on charges, since the solicitor and Debt collection organisation can base their costs on the debt value and not on the cost of actually performing the work and this might be a significant amount to a small organisation. The Debt collection software option is likely to be significantly cheaper as packages can be had for under
