There are few things more frustrating than not being paid for a job you’ve done.  In some cases it can even be the straw that breaks the back of your business’ finances.  So, what can you do?

1. Look at the terms of your contract.  Often the time when payment becomes due is stipulated, if it is not, do not worry.  Statute impliesthe term that payment is to be within a reasonable time.  If this is a business to business contract a reasonable time is usually 28 days.

2. Satisfy yourself there are no problems with the work done.  Invariably customer will try and find any excuse not to pay when chased, so be prepared if elements have not gone to plan to show that you have done all you could reasonably be expected to.  Some businesses take the opportunity half way through the credit period (usually 14 days after the invoice) to call and check everything is fine and remind customers that payment will shortly be due.

3. Chase your debts promptly.  It is easy to get caught up in securing and completing fresh work and credit control becomes another of those administrative tasks which distract.  However, when you look at it as money you have already earned it is easy to see that chasing bad debts is actually the easiest way to improve cash-flow.  Add to this the acknowledged fact that the sooner and more consistently a debt is chased the higher priority it is given by the customer, and it becomes clear what needs to be done.  Some businesses shy away from chasing debts for fear it will put off repeat business or damage on-going relationship.  I would suggest that weighed against the financial health of your business it should not be a concern.  Long gone are the days of quiet sufferance, and handled professionally and with courtesy the image of your business can even be enhanced.  After all, a customer who does not pay but is giving you repeat business should ring alarm bells.

4. Decide if the customer “can’t pay” or “won’t pay”.  Up to this point the only real expense has been the time and the odd phone call or email, however, there has to be a cut off.  This is where you decide whether the debt is worthwhile pursuing through legal channels or not.  It may be that you were not provided with good contact details and the only number you have is a now disconnected mobile.  In which case it may be necessary to chalk it up to experience and improve on the initial information gathered.  Often it is more of a grey area and credit checks may be a wise investment if proportionate to the sums involved.

5. When you suspect it is a case of “won’t pay”.  The first step would be to send a solicitor’s letter before action giving 7-14 days for payment.  If the relationship is business to business, statutory interest and nominal compensation under the Late Payment of Commercial Debts (Interest) Act 1982 can be claimed which often covers the fixed solicitor’s costs.  Frequently, this will trigger payment.

6. If no payment is received you then have options of taking the matter forward through the County Court or by taking steps to insolvency be it bankruptcy of an individual or the winding up of a company.

Should you need assistance or have any queries please contact Frances Redding on 0118 9209490.

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