Commercial debt recovery advice
The letter before action is a formal letter which sets out to your debtor what is owed and what the consequences will be if the debt is not discharged within a specified deadline.
Creditors do not have to send a letter before action but run the risk that if they don’t of losing their right to costs once legal proceedings are issued.
The letter before action can also include a claim for costs and interest under the Late Payment of Commercial Debts (Interest) Act 1998. Under this legislation a creditor is entitled to claim costs as detailed below and interest at 8% above base rate on any invoice that is paid outside the agreed payment terms.
- Invoice amount less than £1,000 – £40
- Invoice amount £1000+ – £10,000 – £70
- Invoice amount £10,000+ – £100
This legislation is an implied term into any business to business contract and does not have to be specifically pleaded in your T&Cs however it good business practice to give a debtor written notice if you do intend to enforce this legislation and can often be a useful tool in your first reminder to the debtor that the invoice has now fallen due for payment.