Late payment is one of the most serious problems a contractor can face. It's endemic to small business in this country, and it's something we all have to do something about. If you allow your cash flow to dwindle, your business could dwindle away.
Fortunately, there is a way to wake up the people who owe you money, and get them to do something about it. Writing a Letter Before Action (LBA) will get you paid almost 90% of the time.
If you do not get paid, then ensure you following the correct legal procedure for collecting payment.
Writing a pre-action letter is effective
Why does writing a letter make a difference? Because this kind of letter, which is an official and formally legal notification of an impending lawsuit, is a way of saying 'this is your last chance.' Most businesses want to avoid costly and time-consuming litigation. When you show them you mean business, they will most often do what they can to avoid these extra hassles.
What goes in the Letter Before Action
There is no official legal form that a Letter Before Action has to take, as a spokesman for the government agency the Trading Standards Institute explains. ''Include in the letter all the essential information: what the job was (invoice reference and date), how much is owed, for how long, and your payment information.
You then set a final deadline for payment. This can be any reasonable period, from one week (it would be hard for payment to reach you in less than a week) to 30 days. 10 days is perfectly reasonable assuming you have already been waiting a long time for payment. But you can make it as long as you wish.
Don't go into detail
It is always best to keep the Letter Before Action as simple as possible. You may have all sorts of issues involving your work with the company that you would like to discuss, but this is not the place for such discussion. Should there be reasons which the company wishes to cite to explain its non-payment, they can reply to your letter. But don't give them an opening for debate.
You should, however, simply remind the company that they may have to pay court costs if the case goes before a tribunal. You can also add that the reputation of the company will not be enhanced by such a public proceeding.
Example and Template: Letter Before Action
14 The Road
NOTICE OF INTENDED COURT PROCEEDINGS
Dear Bad Payers Ltd,
TAKE NOTICE that according to our records the sum of £1234.50 is overdue for payment for invoices 001 and 002.
Unless payment is made to the above address within seven days Legal Action to recover the debt will be taken against you without further notice.
Copies of the outstanding invoices are attached.
14 The Road