Despite the fact that issuing a Letter Before Action (LBA) or Late Payment Demand (LPD) results in prompt settlement of overdue debts in 80% of cases, debt recovery firm Lovetts claims the typical business waits 94 days from the invoice due date before taking such action.
This does not mean businesses are doing nothing at all – many may pursue more informal methods of recovering the debt, offering leniency to debtors who claim interruptions to their cash flow or overdue invoices of their own.
But as it applies from the due date of the invoice – and not from the date it is issued – it means the average business working on 30-day payment terms does not take legal action until over 120 days after the initial invoice was sent out.
Charles Wilson, CEO of Lovetts, says: “Most businesses will start chasing within the first month after the payment is due; when this doesn’t elicit a response, they get tougher with phone calls, letters and emails.
“You can understand how the hours spent chasing can rack up; 94 days later, and with no response, they instruct us to issue an LBA or LPD.”
A better option might be to enlist CPA to handle your Credit Control from start to finish, helping to remove the risk of an invoice going overdue at all.
For example, when an invoice is issued, we follow up with a telephone call to the client, to ensure it has been received and logged into their accounts system – meaning there can be no argument later that the invoice was lost in the post or misplaced by a secretary.