Businesses that fail to plan ahead for the Christmas and New Year break will face a tough financial start to January 2013 according to commercial debt recovery firm Lovetts PLC. Mid December 2012 is the absolute cut off point this year for issuing a legal claim to recover a debt if you want to get paid before Christmas, and Lovetts recommends that a Letter Before Action (LBA) be despatched in the first week of December. Businesses that miss that deadline will effectively give their debtors a 3–6 week holiday, and put their cashflow under immense pressure at the start of the New Year.
Charles Wilson, Chairman of Lovetts said: “There aren’t many businesses in this economic climate that can really afford the luxury of giving their debtors a payment holiday. However many simply fail to plan ahead and end up with a New Year financial hangover with claims for debts amassed from December to be actioned in January and February. These are always our busiest months as businesses grapple to get back what’s owed to them.
“We are really urging businesses to plan ahead this year. If they instruct us to issue an LBA before the 7th of December, they can lodge a claim by 15th December 2013. In 95% of cases the LBA or Claim is usually enough to prompt payment before Christmas. If claims are issued too near to the Christmas Holiday, the Court issued claims will get seriously delayed in the post and not reach debtors until the New Year. Cash is then tight, and a delay of several more weeks in January can be normal.
“We are just out of a recession and there’s no place for complacency when it comes to debt recovery. The trouble with a stop-start approach – whether induced by public or school holidays – is that it sets a precedent for late payers. If you let customers get way with overdue payments once, they will try it next time. Consistency is the key to tackling late payment and there is no reason why one business should be strangling the cashflow of another by conserving cash rather than paying up.”