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It is a concern for any business if they encounter debt issues.
It can affect the financial side of the business and could result in a drastic outcome.
It is important that you have a debt collection plan in place to avoid this happening.
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Within a business, an important aspect to consider is to structure effective debt collection and credit control policy. Cash flow is linked directly to the business’ approach to credit control. If debt collection is not commenced, and you have liability to pay VAT and tax, you will incur that obligation regardless of whether you acquire outstanding debt. Furthermore, if you do not construct an effect debt collection policy, you will experience loss of interest on money held in account.
When supplying goods and services to customers, you will evidently include a time frame for payment but it is highly recommended the inclusion of The Late Payment of Commercial Debts (Interest) Act 1998 which implies into a contract for sale of goods or supply of services a term that debt collection comprises simple interest from the day payment falls due until it is remunerated in full.
If you have to pursue debt collection through the court, it is important that you include an interest claim under section 69 of the County Courts Act 1984. The present interest rate is 8% per annum.
The cost for any litigation matter can be expensive and Court fees are unavoidable and will add further to the expense. As a business, proportionality should be considered between the amount of debt outstanding and the cost of going to court. Understandable, every business suffers loss from time to time.