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How to explain late payments

How to Explain Late Payments

August 27, 2018

So, youre a business owner and you are having problems paying your creditors, what should you do? Our first piece of advice is do not try to hide from the issue, creditors can put a lot of pressure on you but you shouldn’t shy away from speaking to them. Usually if your creditors don’t know your situation then they cannot try to help you, many may cut you a bit of slack or extend your payment terms.

When an invoice has gone far past its due date they may pass it to a debt collection agency such as Collectas. A debt collection agency will consider legal action against your company, this could include a CCJ or Insolvency proceedings. Either of those options will be stressful for you and detrimental to your business, they will damage your companies credit report, any credit cards that you have will probably be stopped and your business will struggle to get any further credit lines.

So I suppose the question is how to explain late payments to your creditors. What is important to remember that at this stage the matter may or may not be impacting your credit score, around a third of your companies credit score is derived from the amount of time payments are made in.

When explaining late payments either to your creditor or to a debt collection agency, be honest. Many creditors will accept a payment plan but if you hide from the issue they will just take legal action against you, which will ultimately cost you more.

Many debt collection agencies will write you a letter to tell you that they have been instructed, you should contact them immediately to explain your situation and why you are struggling to make payment. If you have made any payments then you should send them some sort of payments letter explaining the payments made and the value that you believe to be true.

If you are struggling to make payments, there are many sample letters on the internet that you can adjust to your needs. These will start something like “dear sirs, I write to you in regards to invoice xxxxx” and then go on to explain your situation, both creditors and debt collection agencies will be thankful for any contact that they receive from you and will be more likely to try to help you out as much as they can.

If a debt collection agency receives no contact from you then they will take further action, this may include face to face debt collection which would mean a collections agent visiting your home or business to discuss the issue. This may prove stressful and a debt collection agency will want to avoid this where possible. Further action could be getting taken to court where you may get a CCJ and further down the line your goods may be seized to pay the debt that you owe. They may also be able to put a charge on your house or make you bankrupt.

The key in this whole situation is honesty, if you lie to your creditors they won’t trust you, if you overstretch yourself on payments and fail a payment plan they will not give you another chance. However, if you are honest and negotiate a payment plan that you can afford or tell your creditor a date that you can pay, your payments will go smoothly and you will have no further issues from your creditor. Everybody wants the common goal of having no balance owed on the account, it is important for both sides to work together to achieve this.