On The Road To Recovery

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On the road to recovery

According to research compiled by the Association of Business Recovery Professionals, R3, businesses in the UK saw an average of around one-in-six of their invoices being paid late, in the six-month period up to May 2015.

Late payment by clients or customers can have a serious impact upon SMEs and is often cited as a common cause of insolvency, as businesses struggle to maintain sufficient levels of cash flow to pay their own bills.

The key to tackling tardy debtors is knowing just what options are available to you.

Read the small print

As a first port of call you should consider any contractual documentation between your business and the debtor.  It is not uncommon for terms and conditions to set out a procedure for finding resolutions in the event of a disputed invoice or late payment.  If you later go to Court without having regard to the contract, you could be criticised or penalised for taking action prematurely.

Communication

It is important to be clear about your position and effectively communicate this to the other side.  Some businesses may feel that their requests are simply being ignored, or two parties may have become entrenched, unwilling to negotiate.  A letter from a firm of solicitors setting out your side will show that you are serious about recovering what is rightfully yours – and in our experience, is a quick, cheap, and highly effective method of recovery.

“See you in Court”

In some circumstances, an invoice is unpaid because the client or customer disputes it – perhaps because they question the quality of the goods or work provided, or possibly simply as a delaying tactic to maintain its own cash flow.  It may be necessary, therefore, to go beyond an initial letter and issue Court proceedings.  If successful you will have a Court Judgment that the money is owed to you and an order for the debtor to pay, usually straight away.

Before jumping into litigation, however, businesses should be aware of the inherent risks and costs:

–          There are no guarantees as to the outcome; litigation can be unpredictable

–          Court fees are payable up-front and in some instances will and for claims over £10,000, 5% of the amount claimed

–          Whilst a winner with a claim over £10,000 can usually claim their costs from the other side, the full amounts are not always recoverable

There may also be costs to pay to the other side if you start your claim but then decide you don’t want to proceed.

If in doubt, speak to one of our team who can consider the merits of your case and advise on the prospects of success, before you embark on a Court claim.

Demand and deliver

In certain circumstances it may be appropriate to serve a statutory demand on a debtor.  This is a formal written notice which demands payment of an uncontested debt.  Failure to satisfy the demand gives a business the grounds to petition to wind up the debtor or have them declared bankrupt if they’re an individual.  Winding up a company is an expensive process and there is no guarantee that you as the petitioner will receive a pay-out, unless you have some form of security giving you priority over other creditors.

Serving a statutory demand is a fairly straightforward and inexpensive process, but the benefits are limited.  If the debt is not paid, then you will still need to proceed to petition for winding up, or commence a separate claim for recovery for the money, in which case the costs already expended will not be recoverable.  A statutory demand is also not appropriate where the debt is disputed.

As with all the above options, we recommend that you take specialist advice before serving a statutory demand.  Forbes can provide you with advice as to the most appropriate course of action etc…

This entry was posted in Debt Collection, Dispute Resolution.

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