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As an e-commerce business, you will sell your goods or services to your customers. In return, it is reasonable for you to expect customers to pay for your goods and services promptly. This helps with cash flow, meaning you have funds to pay for your supplies, such as stock to sell and to pay your bills, such as your web hosting costs. However, as an internet business, you can face late payments and end up with unpaid debt, so you may need to send out debt collection letters. This article will discuss how an eCommerce business can send a debt collection letter.
This guide outlines how to resolve commercial disputes.
What is a Debt Collection Letter?
When a business owes your eCommerce brand money, you may need to send them a debt collection letter. This is a formal letter requesting them to pay the money they owe you – you can title this ‘letter of action’.
A letter of action is necessary when a customer has not paid its invoice or outstanding money it owes you within the time frame. Your terms and conditions should say when you expect payment. Alternatively, you may have a contract between you and your business customers.
Your internet brand will usually send a first debt collection letter. However, if this is unsuccessful, you may pass your creditor to a debt collection agency to collect the money you are owed.
How to Send a Debt Collection Letter
If you need to send a debt collection letter to a customer for goods or services that your internet brand sells, you should follow a sound credit control procedure for your internet business. This should say that you will send the letter after the agreed payment date for paying for your eCommerce goods or services expires. If you did not agree to a payment date with your customer, the law says a business should pay a commercial payment within 30 days.
This first demand for payment is a letter that will ask your business customers to pay the money they owe within seven days. It is courteous to telephone the customer to see if you can resolve any invoice issues.
Sometimes you may hear people refer to debt collection letters as a letter before action. Your letter may say that if your internet business does not receive payment by a specific date, your eCommerce brand will take legal action against the business. This is because when you send such a letter, you are carrying out the pre-litigation stage of collecting your eCommerce debt. Mentioning potential legal action can sometimes help encourage your business customers to pay.
Can My eCommerce Business Charge Interest?
When you send a debt collection letter to a creditor, you may have a legal right to add the following:
- interest;
- debt recovery costs; and
- compensation where the debt is of a substantial amount.
The amount you may be able to add is:
- 8% over the Bank of England base rate for interest on late payments;
- £40 compensation per invoice for any debt up to £999.99;
- £70 compensation per invoice for any debt from £1000 up to £999.99; and
- £100 compensation per invoice for any debt over £10,000.
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Key Takeaways
As an e-commerce business, you likely sell or purchase over the internet. Sometimes you allow your customers to pay you slightly after the sale. If you do this, they may end up paying you late. A debt collection letter is a formal letter that your internet business may send when customers pay late. Whether or not a customer is late with payment depends on your payment terms. A debt collection letter can threaten legal action. You may also charge interest, debt recovery fees and compensation.
If you need help understanding how to send a debt collection letter for your e-commerce business, LegalVision’s experienced eCommerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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