With systems in place, it should be simple, fast and efficent to collect invoice payments. One of the most important things for a business, of any size or type, is to have a credit policy. A credit policy will help when considering new customers, or what to do if an existing customer has failed to pay on time. Have this policy in writing, referring back to it whenever needed, and stick to it.
It can be frustrating when clients refuse payment or are unable to pay on time – but unfortunately this happens. So, what options do you have?
Issue a 7-day payment request
This is a final request for the payment to be paid. You must provide the details of the original payment agreement and inform them that you will be taking them to court and filing a claim against them if they are unable to pay within this 7-day period (from the request issue date). Reminding the debtor that they may be held liable for interest and court fees can also be a way to encourage and persuade them to pay the invoice.
Submit a Small Claims Court N1 Form (only applicable for amounts less than £10,000)
You must keep a copy of the payment request form and take it with you if you take the client to court for failing to pay within 7-days. When taking a client to court, you can file a HMCS claim online. If the court act in your favour then this leaves the debtor to pay court fees and interest, on top of their owed amount.
Issue a statutory payment demand (only applicable for amounts over £5,000)
When more than £5,000 is owed, serve a statutory payment demand. This formal document requests the payment to be paid within 21 days. If this fails to be paid, a winding up petition is to be issued.
Delinquent invoice payments can be major burdens on businesses, even moreso for those with financial struggles.
Contact us for more information and for free, helpful advice to assist you with getting your funds paid, obtaining finance and managing bad debt.
If you believe that the company is not able to pay the invoice as it is insolvent then you could issue a winding up petition. This is an expensive option and a last resort. Please see our issuing a winding up petition page here
Categories: Implications for Directors
The Ultimate Guide For Worried Directors
Worried about poor cashflow? Feel you have got into a bit of a mess? Covid-19?, How to pay wages on pay day? For reassuring advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions. A new 20 day moratorium for distressed businesses has also been introduced.