Business

What to do when clients don’t pay

when clientsdont pay

If you’ve been the victim of non-payment by another business, chances are you’re furious. Chasing up invoices is not the most productive use of your valuable time and, when clients simply don’t pay up, it can be a real problem. Astoundingly, recent estimates as blogged about by Wonga suggest that UK SMEs are owed more than £55bn in missed payments in 2014.

With clients increasingly failing to cough up (the situation has worsened by 52% since the summer of 2013), many businesses are turning to increasingly meticulous vetting software to scope out clients ahead of beginning a working relationship. This information makes it easier to reach an informed decision about whether or not a business will be able to pay for the goods or service you deliver. But what if it’s too late for that and you have not been paid?

Try a Mediation Service

Softly, softly catchy monkey. Mediation services are far less expensive and stressful than launching straight in with legal action. They’re often far faster too, utilising professional, unbiased mediators who help both sides reach a mutually satisfactory conclusion. If your non-paying client simply won’t respond to requests for mediation, however, you may need to take heavier measures.

Use a CCJ

County Court Judgements (CCJs) are legal judgements handed down by a county court. These judgements are also referred to as “taking someone to small claims court”. You will need to pay a court fee and if your claim is not successful you may not get your money back. The government website provides a helpful guide to the process which can result in the bailiffs getting sent around…

Issue a Statutory Demand

Once you have issued a statutory demand, the business or client in question will have 21 days to pay you in full (or to offer acceptable payment terms). Often this is enough to scare the company into coughing up. Especially since statutory demands can often lead to much more serious winding up petitions…

Move on to a Winding Up Petition

If a business fails to meet this deadline, they could risk facing a winding up petition (WUP). A WUP will require the company or individual to attend small claims court for a hearing. This hearing will be held in an open court and they will require legal representation.

This is the most serious step at your disposal so approach issuing a WUP with extreme care. You need to be absolutely positive that you are in the right, you must have unequivocal proof of the debt and you must have tried a number of other options before you take this serious step. These petitions are costly. They cost between £300 – £800 to issue, plus a £1,190 court deposit alongside the filing fee. This means they are not to be taken lightly so think carefully before progressing with this step and ensure you are receiving experienced legal advice.

Have you been affected by non-payment in the past? How have you handled the situation and which method have you found to be the most effective? Share your experiences and read others’ below.

Image source: http://commons.wikimedia.org/wiki/File:3D_Judges_Gavel.jpg

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