For business owners, ensuring timely payment for goods and services is critical to maintaining cash flow and sustaining operations. However, late or non-payment is a common issue that can significantly impact business stability. Richard Harris, Dispute Resolution specialist, explains ways to help you get paid.
Proactive Steps to Secure Payment
The best way to avoid payment disputes is to establish clear payment terms and robust credit control procedures from the outset. Here are some steps to put you in the best position to get paid:
- Clear Contractual Agreements
Ensure you have terms and conditions that clearly outline payment terms, due dates, and consequences for late payment. Terms and Conditions can also protect you in other ways such as limiting liability. You should continually review your Terms and Conditions to make sure they are up to date and right for your business – if you’ve not looked at them for a while you should make this a priority. .
Not only is it important to have a good set of terms and conditions, but you also need to ensure they are incorporated into contracts you are entering into and that you are trading on your terms. It is essential once you have your terms and conditions that you also look at your processes throughout the business to make sure they are incorporated into your contracts.
- Invoicing Best Practices
A good invoice should include:
- Correct and detailed descriptions of goods/services provided
- Payment terms and due date (matching your terms and conditions)
- Payment methods
- State that the supply of the goods/services is subject to your terms and conditions and directing where they can be found.
- Credit Control & Due Diligence
Before you extend credit to a client at all, conduct background checks to assess their financial reliability. Setting credit limits and requesting deposits for large orders can further safeguard against non-payment. If you are unsure you may want to be paid upfront.
If you do decide to extend credit, once you have provided your goods and services, you should have internal processes in place for being paid for that work. These processes should include timely reminders chasing payment in the run up to the due date and on the due date. If an invoice goes over its due date, you should then look at your processes for chasing payment and escalating your correspondence from simple chasing letters to threatening more formal legal action.
The processes you should adopt should be bespoke to your business, your industry and your customers. Working with recovery specialists such as DTM Legal can ensure you have the right processes in place for your business.
What to Do When Payment is Late & You Have Followed Your Internal Processes
Even with preventative measures in place, late payments may still occur. If a client has not settled their invoice by the due date, consider the following steps:
- Formal Demand Letter
If reminders are ignored, a solicitor’s letter before action (LBA) can prompt payment by formally outlining legal consequences for non-payment.
- Alternative Dispute Resolution (ADR)
If negotiations stall, mediation or arbitration may be an effective way to resolve the dispute without resorting to litigation. ADR can save time, costs, and preserve business relationships.
If the above don’t result in payment, your next options would be to look at formal legal options.
Legal Options: How to Get Paid
When informal methods fail, businesses may need to pursue legal action:
- Winding Up Demand
If it is a company that owes you money (and there is no dispute) you may send a winding up demand letter putting the company on notice that you consider it to be insolvent. This letter can be used to provide a short deadline for a response and allows you to act quickly should it be necessary to do so.
- Statutory Demand
A statutory demand gives the debtor 21 days to settle their debt before insolvency proceedings can be initiated. This is a strong deterrent, particularly for persistent late payers. This can be used against companies or individuals.
- Court Claims
You can issue a claim in Court to recover the sums due and owing to you. If the debtor doesn’t respond, you can obtain Judgment which you can then enforce. If the debtor does dispute your claim, this will then be determined by the Court. Each dispute is different and will be decided on its own facts. DTM Legal’s dispute resolution specialists can advise you on any Court proceedings you issue and guide you through the process to put you in the best position to obtain a Judgment you can then enforce.
- Enforcement Actions
If a Judgment is obtained but remains unpaid, enforcement options include:
- Enforcement Officers – instructing bailiffs to recover the debt
- Charging Orders – securing the debt against the debtor’s property
- Third-Party Debt Orders – recovering funds from the debtor’s bank account
Seek Expert Legal Advice
Navigating payment disputes can be complex, and early intervention is often key to successful recovery. The DTM legal Dispute Resolution team has extensive experience in helping businesses secure payment through legal means while preserving valuable commercial relationships.
If you need advice on recovering outstanding payments or strengthening your credit control processes, contact our team today by contacting Richard Harris, Partner and Dispute Resolution Solicitor by calling 0151 230 1215, emailing richard.harris@dtmlegal.com or submitting an enquiry using the link below.
