It doesn’t matter how busy your business is if customers are not paying for goods and services supplied in accordance with the agreed terms. After all, we all know that when it comes to business – cash is king. How can you take steps to minimise the risk of your business’ growth and profitability being damaged by the inability or unwillingness of customers to pay? We set out our top tips and thoughts on how to prevent disputes over payments from arising and how to deal with them if they do.
How Can You Prevent Disputes over Payments?
- Check your terms and conditions, do they protect you as far as they can?
When reviewing your terms and conditions you should:
- Make sure you clearly define the products/services you are providing;
- Set out a time limit for queries to be raised after delivery;
- Take advice as to whether any exclusions or limits of liability are enforceable;
- Take advice as to whether any penalties for breach or termination are enforceable;
- Consider whether it would be appropriate for you to have a retention of title clause. This is a provision in a contract for the sale of goods where the title to goods remains vested in the seller until certain obligations (e.g. the payment) are fulfilled by the buyer.
- Are your terms and conditions incorporated into the contract or are you subject to the other party’s terms and conditions?
When answering this, you should consider the following points:
- To be incorporated into a contract the terms and conditions must be submitted to the other party before the contract is finalised. Putting the terms and conditions on an invoice will usually be too late;
- In some cases, particularly onerous terms must be brought to the other party’s attention in order to be enforceable;
- In cases where both parties terms and conditions have been submitted to the other party the set that were submitted last, before the contract is finalised, will be the set that apply;
- You may be subject to the other party’s terms and conditions from a previous course of dealing.
- Do you know who your contract is with?
In order to enforce an invoice it should be addressed to a legal entity. Is your contract with a limited company, an individual sole trader or a partnership? Make sure you know who the legal entity is and that your invoices, order acknowledgments, delivery notes and statements of account are correctly and consistently addressed.
What Action Can You Take to Resolve Disputes When They Do Happen?
If one of your invoices is disputed it’s important to take legal advice as soon as possible. An expert Dispute Resolution Solicitor can quickly assess the situation for you and take efficient, cost effective action which is geared to the specific situation and your business.
If the debt is not paid and hasn’t been disputed, a compliant Letter of Demand from your Solicitor may resolve the matter. If not, a Statutory Demand or insolvency proceedings may be the appropriate next steps.
In other cases, County Court proceedings may be appropriate (once all prescribed pre-action steps have been taken). Following this, it may be necessary to work with your Solicitor to enforce a judgement. This could be done through a number of methods such as; Charging Orders, Third Party Debt Orders, Attachment of Earnings and Instruction of Bailiffs.