Debt Collection

In today’s increasingly competitive markets, it can be tough drumming up new trade. But that’s not the end of it – even when you’ve secured the business, you still have to make sure you get paid. Solicitor and debt expert Kally Singh outlines what to do when the cheque isn’t in the post

In the current economic climate debtors will make all excuses possible in order to not make payment of outstanding invoices. A company or individual needs to ensure that it is best placed to be paid for goods and services supplied. We have all heard the excuses “the cheque is in the post” and “I am awaiting payment from my customer”. In my practice area I find that generally those who shout the loudest will have more of a chance of being paid. You do not want to be in a queue of creditors
awaiting payment. It is likely that the debtor is going to pay someone who he needs before other creditors.

In order to give you the best possible opportunity of recovering payment you need to ensure that you have correct procedures in place:

1. You need to know with whom you have contracted. Is it an individual, partnership or a company? When it comes to litigation the correct status of a Defendant is an essential requisite. If you have named the wrong Defendant there is a risk that you will have to restart Court proceedings and have a liability to pay costs. What is more important is that there could be a substantial delay in the Court proceedings and ultimate recovery of your outstanding invoice. In the case of a company consideration should be given to getting a personal guarantee from a Director of the company. This is important especially in a situation where you are dealing with a new customer. It is better to be paid for a job than have a new customer who simply does not pay.

2. Consideration should be given to changing your terms and conditions to ensure that payment is either made prior to delivery of goods or provision of services or to avoid risks it may be appropriate to shorten the invoice payment period terms from 28 days to 14 days or even shorter.

3. If invoices are outstanding, engage with the customer by letter, e-mail or telephone. Communication is important. If you are being fobbed off you need to ensure that appropriate action is taken to enforce payment. Do not delay! I would say that if payment is not received within 21 days then you should considering taking further action whether through the Courts or alternative methods.

4. Court proceedings can be issued for any sum. Court fees payable upon issuing a claim vary between £30 to over £1,500. The amount payable depends on the amount of the outstanding claim.

5. You are able to claim interest pursuant to a contractual rate or alternatively, under the Late Payment of Commercial Debts (Interest) Act 1998 legislation which currently is claimable at 8.5% per annum ie, 8% above the bank base rate.

6. If a debt is undisputed and involves a company you could take an aggressive approach to recover payment by serving a Statutory Demand and thereafter (after expiry of the time period of the demand) issuing a Winding up Petition. A Statutory Demand pursuant to the Insolvency Act 1986 legislation gives a Debtor Company 21 days following service of the demand to pay. In default of payment or an agreement being reached, a Winding up Petition can be issued. Winding up is expensive and can result in payment from a reluctant debtor. A company may find that once a Petition is issued that its bank account is frozen. Winding up should only be used where there is no real dispute as otherwise there is a risk of the Court finding an abuse of process. You should seek specialist advice.

7. In the case of an individual if the debt is £750 or more then following service of a Statutory Demand you could issue a Creditor’s Bankruptcy Petition.

There are many procedures that can be used in order to assist companies and individuals recover monies due and owing to them. It is likely that debts that are due will continue to increase as a result of the current economic climate. In the circumstances credit control needs to be at the forefront of all businesses. You need to ensure that you do not get labelled as being a “soft touch” for potential debtors.

Should you require further advice or assistance, please contact Kally Singh on 01733 295642 or e-mail

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