Cash can make or break a business

Help is at hand for late payments

By Michael Richards – Associate

It is no secret that cash can make or break a business. Overheads are already increasing with the demands on rising energy costs and the cost of living to what is reported to be over a 10% hike.

This impact is that businesses are tightening up on their cash position, which is resulting in an increase in creditors missing agreed payment terms. If this sounds familiar, what does it mean for you?

First, you must pay your suppliers within your agreed payment terms. If you don’t you could see claims brought against you which may include added interest and costs – in short, you’ll end up paying even more for your goods and services. More drastic is that if you owe a certain amount, a creditor may consider issuing a Winding Up petition against you. This is very serious and you would need legal advice immediately. Adding more cost to your business.

Picking up the phone

If you are meeting your client payment terms but find your customers have started to pay late (or not pay at all) often a simple phone call to them can help you understand where the business is at and why they have not yet paid.

What if they are ignoring you? Or what if they keep emailing you telling you money is coming on the next payment run – which never turns up – giving you cause for concern.

With 16 years’ experience, I have seen every excuse under the sun.

Challenging times

No-one can deny that this is a challenging time for people and businesses but where businesses can, they must meet their credit objectives and pay their suppliers under agreed terms. If they can’t do so, they may well be insolvent and should not continue to trade or enter in to credit arrangements.

What can you do to improve the situation?

  • Make sure you have clear payment terms.
  • Make sure invoices are properly raised and issued on the same day.
  • Send invoices by post and by email (you now have an audit trail).
  • Once the invoice becomes overdue, it is time to start chasing.

Steps to take to get paid on time

1.If you are lucky enough to have a credit controller or person within the business willing to chase overdue invoices first, they can make a polite call to your contact or their accounts team. Late payment may genuinely be an oversight and would usually be sorted out within days.

2.If you are promised payment and it doesn’t arrive, follow up the day after it was due, again with a polite call.

3.If you find you are not getting anywhere or hearing excuses, now is the time to send a letter. Let the company know that the invoices are now overdue and they need paying within 7 days or you will be looking to escalate the non-payment situation with your solicitor.

At this point I often hear: Aren’t solicitors expensive? Followed by: I don’t want to be spending even more money if the invoices aren’t going to be paid.

Providing you don’t have a contract that prevents you from doing so, the Late Payment of Commercial Debts (Interest) Act 1998 means you can recover interest, compensation and legal costs not met by the compensation. If you are unsure about your situation, please give me a call as I’m happy to talk through this with you. On a pre-legal basis, if we do not recover your debt, there is no charge to you.

What if you’re worried about getting solicitors involved? Would escalating the situation impact your relationship with your clients and the perception of the business?

We understand business relationships take time to build and are important. Our ‘human’ approach reflects our company values. We would work with you to find a solution, rather than at a distance. We provide all clients with a clear step-by-step process, providing transparency about costs, proactively keeping them up to date at every step.

Our process involves notification of instruction and a Letter Before Action. We follow up with calls to the business to see if we can agree payment of the debt without any need to escalate further. We pride ourselves an approach which is focused on settlement at a pre-legal stage and an cooperative resolution between everyone involved.

Common questions and concerns
Q: What if a company does not engage?

We then deal with in-house litigation and insolvency proceedings.

Q: If I’m worried and want to know more, could I talk to you without being charged?

Yes. Before starting work for any client, I always like to get a feel and understanding of their business. I would be delighted to talk through any of your worries and offer general pointers.

Times are tough. I get that. But help is at hand so please, let’s talk as I believe I can achieve the result you’re looking for – getting paid on time now and in the future.

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