l Final letter: Late payment is just one of the financial administration problems that a small company can face. However, there is a way to wake up the people who owe you money and get most of them to do something about it. Anecdotal evidence suggests that sending a letter before action (LBA) will get you paid in nine out of 10 cases.
l Last chance: Most businesses will want to avoid costly and time-consuming litigation. So when you show them you mean business with an LBA, they will most often do what they can to avoid the extra hassle. An LBA is a formal legal notification of impending legal action. It is your way of saying that this is their last chance.
l Contents: There is no official legal form that an LBA has to take. The Trading Standards Institute suggest you include "what the job was (invoice reference and date), how much is owed, for how long and your payment information".
l Set a deadline: You also need to 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. Ten days is perfectly reasonable, assuming you have already been waiting a long time.
l Court costs: You may also want to remind the debtor that they may have to pay court costs if the case gets that far. You could add that the reputation of their firm will not be enhanced by such a public proceeding.
l LBAs are even more effective if they are sent with a solicitor's letterhead on them. They only cost around £2 + VAT at Lovetts (www.lovetts.co.uk) or Thomas Higgins (www.thomashiggins.com). If the debt is still unpaid, you can go straight to the small claims court and seek a county court judgment (CCJ).
You could consider selling the bad debt. There are a few debt purchase companies an internet search will give you a selection of these who will buy portfolios of bad invoices that have not been paid. However, view this as a last resort, since you may only receive literally pennies in the pound. Typically, before they agree to purchase debts these companies will:
1. Undertake a legal assessment of the character of the debt and the underlying contract;
2. Investigate the individual or company that owes the debt to determine the viability of litigation; and
3. Be able to indicate an approximate figure that they would pay for your debt.