According to Lovetts Plc, a commercial debt recovery law firm small businesses are taking action to chase late payments much more quickly than during the same period in 2010. Late payers are now being issued with a Letter Before Action 33 days earlier than they would have been last year. Worryingly, the same trend occurred just before the credit crunch in 2008.
A quarterly analysis is made by the company of the amount and value of LBAs which have been issued and the number of claims made. A Letter Before Action is sent out to a customer to prompt immediate payment or a response, before the business starts proceedings to recover the debt legally. According to Lovetts, nine percent more claims were issued during the second quarter of 2011, with the value rising by 25 percent in comparison to the initial three months of the year.
After the recession, small businesses displayed caution when chasing unpaid invoices, anxious not to lose clients. However, the latest figures from Lovetts indicate that small business owners are taking tougher action, maybe in preparation for tougher times ahead. The chairman and managing director of Lovetts, Charles Wilson said:
“This tolerance appears to have run its course and now businesses are really putting the pressure on. No doubt the failure of several high street brands along with the debt problems in the Eurozone are making many businesses jittery and the time for leniency has gone.”
He also commented that although it was positive news that small businesses were chasing late payments, it would also appear that businesses were preparing for a deterioration in the economy.
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