Rebecca Taylor

It is important for all business of any size to have an effective credit control procedure in place to ensure that they are paid for the work that they carry out for customers. Given the current coronavirus pandemic, many businesses are experiencing problems with cash flow. As such, it is more important than ever to ensure that you are paid for your services in good time.

Credit control can take a number of forms, but it is important for every business to have a credit control procedure in place.

The first step to good credit control is to try and prevent bad debtors in the first place. You can minimise the risk of non-payment by undertaking credit checks on individuals or companies before you do business with them. If you identify (from your credit checks) that an individual or company has defaulted on a previous payment agreement, you may think twice about doing business with them or be cautious in doing business with them and require payment on account of providing goods/services upfront. You could also invoice the customer on an interim basis, either monthly or after carrying out certain stages of work.

You should also consider ensuring that your standard terms and conditions properly protect you. You may wish to include a clause in your terms and conditions allowing you to suspend the provision of goods and/or services in the event that an invoice has not been paid on time. A retention of title clause may also be suitable for your business. A retention of title clause allows you to retain legal ownership of goods which have been delivered to the customer until (for example) the purchase price has been paid in full. If a retention of title clause is used, the terms and conditions should also include a right for you to enter the customer’s property and take back possession of the goods in the event that they default of payment.

Once invoices are raised, the key is to keep up the pressure on the debtor and remain in regular communication with them. As an example, you may choose to call them a week after the invoice has been issued to check that they are happy with it and do not dispute the amount owing. You may then consider calling them a week before it is due to remind them that it is about to become due.

Once a bill becomes overdue, then you may choose to take more aggressive action. This may be by way of regular chasers by telephone, letter or email. Initially, it might be sensible to give the debtor a call to find out why they haven’t paid the invoice. It might be the case that they just forgotten about it, or perhaps they dispute the amount. The key is to ensure that there are no long delays between the chasers and that the demands are made within reasonably quick succession in order to keep the pressure up on the debtor to pay.

If the debt remains outstanding after sending chasers and demand letters, you may wish to consider issuing court proceedings or serving a statutory demand on the debtor. Statutory demands should not be served if the debtor disputes the debt. If you serve a statutory demand on a debtor when the debt is disputed, the debtor may apply to the court to have the statutory demand set aside and the court may order you to pay the debtor’s costs of making the application (which may be significant).

If you require advice in respect of issuing court proceedings or serving a statutory demand, then please contact myself or Andrew Ryan – Partner and Head of the Dispute Resolution department on 0161 832 3304.


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