Wouldn't all companies love it if their customers paid invoices on time? You wouldn't need to spend time chasing debts and you could concentrate on actually running your business. However debtors will most likely be ever present.
Businesses can invoice clients early, wait patiently for payment, send chase emails and be optimistic that payment will someday finally land at the bank.
But sometimes those polite little reminders, sending copy invoices and monthly statements are just not enough to deal with those customers who are adamant they are not paying.
So what can you do to ensure your business is paid the money it is owed? How do you collect debts from customers?
Choosing how and when you need to take formal action can be difficult and there are a few informal options at your disposal before starting legal action. After all, the last thing you want to do is spend time and money going to court for every invoice that is overdue by a few days.
But when you've exhausted the chasing letters and phone calls, we wanted to share our experiences and tips on how to collect debt from a customer, starting with establishing your legal position on the debt.
Proof of the debt.
While the vast majority of business debts won't require court action, it is important to establish your legal position and understand how to collect a debt legally.
In order to take a debt claim to court, you need to have some kind of evidence that the debt amount you wish to claim is due. In most cases a copy of your invoice, bill or order will suffice, however generally you should have evidence of:
With the above steps and evidence in place, you should be in a good position to start legal proceedings against the debtor.
However if the customer disputes the money is owed, for example because they believe the goods were faulty, you may need to take steps to investigate and resolve the business dispute before proceeding with formal debt action.
Legal help with non-paying customers.
Informal actions such as sending overdue notices, emailing the debtor's accounts team and speaking directly about payment should all be attempted yourself before you begin seeking assistance with recovering the debt.
But once you do decide to go down a more formal route to secure a payment you have a few options:
Option 1 - Submit a debt claim yourself
To make a court claim on your own you can use the HMCTS Money Claim Online service. It offers a process to recover the money your business is owed by walking you through the submission of an online claim and paying a court fee.
You need to be aware that these are court proceedings and so you should familiarise yourself with the 'pre action' rules along with what happens should you win your claim and receive a judgment. Ensure you read the associated Money Claim Online User Guide thoroughly before starting the claim process.
Option 2 - Hire a debt collector
When you hire a debt collection agency they will start chasing the debt and in some scenarios begin the legal process to recover it through the courts. You should bear in mind that debt collection agencies don't have any special legal powers beyond what you can do yourself. Generally a debt collection agent will also take a proportion of any debt that they are successful in collecting to cover their fees.
Option 3 - Instruct Debt Recovery Solicitors
A Solicitor should provide some general advice on the process and your prospects along with a fixed fee of what they will charge. If their fees are more than the money you are seeking from your customer, then you'll be better going with another route. However experienced debt recovery solicitors should have a fee structure which complements the amount you are wishing to recover and the complexity of the issue (i.e. it will be more complicated if the debtor defends the claim or disputes the debt being owed).
In the majority of debt recovery claims, the initial solicitor's 'Letter Before Action' often does the trick and the customer will opt to pay their bill rather than face court proceedings from a law firm.
If court action is needed a solicitor can explain the risks and advise on items such as recovering court fees and any statutory late payment charge that can be made. For example, interest may be able to claimed on top of the debt (usually 8% above base rate) via the Late Payment of Commercial Debts Act.
You may feel bad 'hounding' a customer about paying their debt or even getting a solicitor involved, but you shouldn't. You did your job and it is not your fault they have failed to pay you in a timely manner.
Being understanding to your customers while knowing your legal rights is what all responsible businesses should aim for.
As a responsible dog owner, receiving notification that someone is pursuing a compensation claim against you after being bitten by your dog can be a shock.
UK research indicates that one in four people have been bitten by a dog in their lifetime, with a third of bites requiring medical attention but only 0.6% requiring hospital attendance. So, while being seriously injured by a dog is relatively rare, any injury to a human which involves your pet will still be a cause for concern.
What happens if my dog bites someone?
In the immediate aftermath of a bite or attack, the police often become involved to assess if your animal is dangerous or could be considered out of control. The outcome of this investigation could be a warning, fine, banning order or even prison sentence in the most serious of cases.
But regardless of any action the police may take in a criminal capacity, you may still be subjected to civil legal proceedings in the form of a compensation claim made by the injured party.
If this occurs then you'll need to be aware of the options available in defending a dog related personal injury claim, and that you cannot always be held legally responsible for injuries that have been caused by your pet.
Insurance covering dog bite claims.
Does home insurance cover dog bites?
There are various insurance policies which you may have in place that can cover you in the event that a personal injury claim is made against you as a dog owner. Whether you dog bit someone on your property or in a public place (street, park, woods etc.)
Should you receive a claim, it's recommended to first check for any possible insurance policy, and if cover exists, report the claim to your insurer as soon as possible. They will then take over the handling of the claim and instruct a solicitor to act on your behalf.
Dog bite claim with no insurance
If no insurance cover exists, or your insurer refuses to indemnify you, then you need to seek advice from a personal injury defence lawyer on your uninsured dog bite claim.
The Letter of Claim you receive informing you of the claim will need to be acknowledged in a certain timeframe (usually 21 days) so gaining legal advice as soon as this letter is received is highly recommended.
Dog bites and the law.
For a claimant to be successful in their damages claim they must prove that the owner or keeper was responsible for the actions of the animal, and/or have been negligent in some way.
The Animals Act
A key piece of law that is often cited in animal attack cases is the Animals Act 1971. This legislation defines the conditions that a dog’s keeper can be responsible for the behaviour and damage caused by their dog.
The act provides three tests that must be met before the owner or person in possession of the animal can be held liable for any damage that has been caused. Basically, these tests are that:
a. The damage or injury was likely to be caused by the animal unless it was restrained, and
b. It was caused by a characteristic of the animal, and
c. The characteristic was known to the owner or keeper of the animal.
While any dog has the ability to bite, they will generally only ever do this in unusual circumstances which may not be able to be reasonably foreseen by the keeper.
Proving negligence in dog bite cases
Being the owner or handler of a dog, you owe the public and any visitors to your home a 'duty of care' to prevent the animal from injuring them. If a claimant can prove that an owner has breached this duty, and so has been negligent, then they may be entitled to compensation.
A person simply being bitten by a dog does not mean that the owner has been negligent. A claimant would need to show that they were aware that the dog attack could happen and failed to take adequate steps to prevent it.
Defences to a dog bite injury.
As you have probably gathered, defending a dog bite compensation claim is a complex task and you should obtain specialist legal advice when faced with a claim.
An experienced solicitor can investigate the circumstances of the incident, as well as the history of the animal, to present all mitigating factors on why you may not be liable for the injuries caused. For example, common dog bite law defences may include:
When it comes to the law, your beloved family pet is simply considered a piece of property that has inflicted damage on another person. So if you are placed in the position of defending a claim, ensure you seek the legal advice you need and your pet deserves.
Non or late paying customers are unfortunately a fact of life for most small to medium businesses. While at best delayed payments can be annoying, at worst they will have a measurable and detrimental impact on the smooth running of your business.
Recent figures via the Official Statutory Register of Judgments has given an insight into the potential scale of the problems around business debts and disputes that have been escalated to the courts.
The data shows that in the third quarter of 2020, and despite the pandemic, there were almost 16,000 County Court Judgments (CCJs) issued against businesses. The average value of each business debt is over £5,000, which is 79% higher than in the first quarter of 2019.
While there are fixed fee debt recovery services available to deal with most size B2B debts, needless to say it's more important than ever to make sure you have effective procedures in place for protecting cash flow in your business.
So, we wanted to share some of the proactive general advice that we've provided to our clients after helping them recover business debts owed to them.
Know your customer.
Is sounds simple, but make sure you know who you are doing business with.
Try to find out the size of the organisation and whether they are a partnership, sole-trader, limited company or PLC. What is their full legal name and do they use any trading names? Conducting a quick Internet search for these names may reveal information you need to be aware of.
Limited company checks.
Make use of public services such as Companies House to verify your private limited company customers.
When first considering doing business with them, verify their registered office, company number and trading status. You can use this information to find who owns the business and verify that the person instructing you has the authority to do so on behalf of them.
Then throughout your relationship put a reminder in to recheck these details periodically. That way you can be alert to any warning signs such as overdue accounts, charges being registered against them or large drops in cash reserves which may indicate their business is struggling.
Prompt Payment Code.
Check if your business customer is part of the Government's Prompt Payment Code (PPC) where those signed up are obliged to pay small businesses invoices within 30 days.
The current signatories can be found on the PPC website.
Whenever possible try to request payment in advance. If this is not possible, attempt to secure partial payment (for materials etc.) or some kind of deposit.
With some larger business customers it can take a while for a new supplier to get onto their accounts systems. So starting this process as soon as possible can speed up future payments.
Invoice as soon as the order is completed, or on lengthy jobs gain agreement to do so at periodic intervals. Knowing there is a payment problem half way through a job is better than finding out at the end.
Don't hide your payment terms.
Include standard payment terms within your T&Cs and on your invoices, ensuring they are clear and reasonable.
Make customers aware of these terms before they order, when you provide a quote and when an invoice is at risk of becoming overdue. Your invoice should also include details on how to pay you, such as your bank account or online payment information.
Get it in writing.
For large or regular transactions consider getting a specific contract drawn up and signed by both parties. At the very least ensure the main points of the order or transaction are in writing with evidence that it has been agreed by each party.
If you ever end up having to consider legal action, good record keeping will pay dividends.
Everything from the original order, proof of delivery and late payment chases should be kept. Your solicitor will want written evidence and a chronology of events to proceed with a claim, so keep copies of any emails and notes of any telephone calls.
What to do when a client doesn't pay?
Implementing the above tips may help in reducing the chances and impact of late paying business customers. But even with the most vigilant owner, on-the-ball accounts team and strictest terms and conditions, you will still encounter customers that simply choose not to pay.
So your next step is to consider formal legal action to recover the amount owed, which usually starts with sending a Debt Recovery Letter Before Action.
Having robust Terms & Conditions, a consistent approach to invoicing, and a clear paper trail will help you get what's owed to you that much quicker and assist your legal claim should you ever need to get a solicitor involved.
Catalyst Law are team of legal professionals with over 20 years' experience helping businesses and people with their legal problems.
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