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There is a huge and growing late payment problem in the UK with £55 billion currently owed to SMEs. To put this figure into a wider context, it is greater than the amount collected each year in annual corporation tax receipts. Since last summer, late payment has rocketed 52%with the average small business now owed £11,358 in late invoices alone.

Traditionally, many solicitors have not focused on providing a debt recovery solution for micro-SMEs due to the perceived small scale, ad-hoc nature of this work.  Those that do are often costly, which has meant Debt Collection Agencies (DCAs) have usually been the first choice for business owners to recoup money owed.

However, cost-effective alternatives are emerging, such as Debt Guard Solicitors, that operate on a different model to most law firms and DCAs.

For instance, unlike most of their law firm counterparts, they don’t care how many debts a business has and will happily take instruction on just one debt if that is all a business wants to load. This is particularly appealing to the smallest businesses and sole traders (1 to 9 employees) because - more than most - they operate on fine margins and heavily rely on a healthy cash flow to keep accounts in the black.

Unlike debt collection agencies, specialist debt recovery law firms also have the in-house legal expertise needed to best advise on how to reclaim money and even how to get back more money than bargained for, through the application of government legislation on late payment interest.

Charging late payment interest will not only improve business cash flow, but act as a vital weapon in your armoury to make crystal clear to suppliers to avoid being late on payments in the future. 

For example, if a debtor owes £8,000 and is 100 days late in paying their invoice, it works out that you are legally entitled to charge £187.55 in additional interest fees plus a £70 one off compensation fee. This means an extra sum of £262.55 can be claimed from the debtor, which is on top of the £8,000 invoice amount. 

There is also a six year window to claim statutory interest for late payment (five years in Scotland), meaning it can be applied in retrospect and prevent having to write off old debt.

Another myth that some companies believe about using solicitors is that activity can be expensive. But in reality you can start the legal process from as little as £2 by sending out a solicitor’s letter to your debtor, which in most cases will succeed in recovering your money without any other costs incurred. This is particularly true of Debt Guard Solicitors where no commission is charged on top of the cost of the letter.  If court action is required to chase debt, then the majority of this cost is fully recovered from the debtor, making litigation proceedings less expensive than initially perceived.

Taking legal action against a customer is something that should not be entered into lightly, but in reality is often a necessity if calls for payment are continually ignored. Using a law firm like Debt Guard Solicitors, which has a hassle-free and online-only portal designed to enable customers to fully control the process, is the modern way to recover commercial debt.

Mark Burgess, Chief Operating Officer – Commercial Recoveries, at Debt Guard Solicitors.

To register for two free solicitor’s letters to help chase down late payment, visit our website www.debtguard.co.uk and use the voucher code TXFR6124 to claim your free letters.