Make sure you follow the right first step in order to recover a debt that is owing to you or your organisation with a debt recovery letter. By using a payment reminder letter you can feel assured you that you have formally reminded your client or customer to make payment. This reminder letter details all the necessary information from the date the debt is owing to whether interest will be payable to even the threat of further action if the debt is not paid.
When should I use a debt recovery letter?
Use this letter:
- when you want to recover a debt that is owing to you or your organisation
- when you want to follow up after an invoice has been sent and the payment terms have expired or after 28 days have passed and the debt remains outstanding
- when you want to commence a more formal procedure for collection of the debt
What's included in a debt recovery letter?
This late payment letter covers:
- the date the debt owing should have been paid
- whether interest is payable on the debt
- automatic calculation of the amount of interest to be paid in total
- automatic calculation of the continuing daily amount of interest charged as long as the debt remains unpaid
- a threat of further action which may be taken if the debt is not paid
What's a debt recovery letter?
A debt recovery letter or late payment letter is a letter to remind your client or customer that they owe you or your organisation. It sets out the details of the debt such as the date the debt owing should have been paid, whether interest is payable in the debt and a reminder that if the payment is not settled a legal action may follow.
Do I need a debt recovery letter?
You need this letter when your client or customer is late with a payment and you want to commence a formal procedure for collection of debt. This letter will remind your customer to pay the debt, and ensure that your debtor knows the consequences of not settling the payment. These include late payment interest charges (if it is a business transaction) and/or a threat of legal action.
Can I use this letter to recover debt from individuals or organisations?
You can use this letter to start a debt recovery process from both individuals and organisations whether in course of business or not. Where there is no contractual interest, you can only charge an interest on late payments if it's a business to business transaction and statutory interest applies. Statutory interest is 8% plus the Bank of England base rate and may be subject to changes. You cannot claim statutory interest if your customer is consumer and not acting in the course of business. In such scenarios, you can only claim interest if the contract sets a contractual rate, i.e. late payment rate specified in the contract.
How much time should you give the debtor to fully repay the outstanding amount?
You should request your debtor to arrange the payment as soon as possible or on the same date. You can offer in this letter the debtor the option of making an alternative payment arrangement. An alternative payment arrangement is a repayment agreement with your debtor in regular fixed instalments.
Ask a lawyer for:
- advice on debt recovery procedures
- advice on debt recovery outside England and Wales
- advice as to whether an insolvency procedure is appropriate