Ask owners of small Jersey businesses what frustrates them most and the chances are they will tell you it is the customers who don’t pay on time. Late payment is a significant issue for small firms. It is not just time consuming trying to get money out of people – for a small firm, it can be a matter of life and death.
So how can you get customers pay without delay? The first step is to make sure there is nothing preventing payment. Find out whether it is simply an administrative error. Is there an issue about whether they have received the invoice? Did they receive the goods? Is there an argument about the standard of service they have received?
If there is a genuine dispute about the service or product, or the amount charged, it needs to be resolved before any further action is taken.
The next step can be as simple as making a call to somebody in the credit control department who hasn’t realised your invoice has been pushed to the bottom of the pile. If that doesn’t work see if there is somebody you could contact at a more senior level.
If phone calls do not get you anywhere a formal letter on headed notepaper – from your firm’s credit control department or from Benest & Syvret – often produces results. This is called a letter before action and gives the customer a last chance to pay before things get serious.
Often this flushes out those people who are trying to buy a bit of time. A solicitor’s letter will help you move up the pecking order because the customer knows he can’t just ignore it. Also it shows that you are taking this seriously and so are likely to take further action if they don’t pay.
You might want to point out in the letter that you are entitled to recover fixed costs relating to the proceedings over and above the amount of the debt. This may encourage reluctant payers to cough up.
When it comes to excuses our clients have heard them all. Explanations from customers have included: the person responsible for signing the cheques is on holiday; the accounts department has no direct phone line and can only be contacted by email; and someone new has joined the company and because she is unfamiliar with the systems it’s unclear which bills she has and hasn’t paid.
Some customers will do anything to lengthen the time it takes to pay. It does help to keep hassling them but it is all time out of your day and is very frustrating.
If polite tactics do not work and there is no prospect of negotiation, the next step will be to consider Jersey Court proceedings.
We recommend that you should not begin Jersey Court action for non-payment unless you are reasonably certain the other side has the money to pay. If there is any suggestion of them facing insolvency or bankruptcy, then any action will need careful consideration.
You also need to be aware that even if the Court finds in your favour it will not pursue the money for you. You have to enforce the judgment through the Viscount’s Department and if the other side is unable to pay you could find yourself no better off – or back in Court.
If you are owed less than £10,000 you can go through the Petty Debts Court. For unpaid bills over £10,000 claims must be issued in the Royal Court.
Once you have lodged your claim the customer has three weeks to respond. Given this last chance, it may finally pay up to avoid litigation.
If it continues to dispute the claim, however, a hearing will be held at which each side will present their case to a judge.
In some cases, even though it may go against every natural instinct and feel extremely unfair, the wisest thing may be to write off the outstanding payment. Chasing an unpaid bill, however you do it, is going to cost you time, money and hard work, and for small amounts you need to think carefully about whether the money you stand to gain is worth all the distraction and disruption to your business.
You have to take a commercial view. Always bear in mind that ultimately it is about getting money, not about getting even.
At this time many businesses will be experiencing problems getting paid for goods or services provided. Our Jersey Dispute Resolution team sets out the following tips to help get debts paid:-
Make sure you have clearly agreed and documented the basis on which you are providing goods or services and that there is an agreed price or method of calculating this. Benest & Syvret can provide an initial review of clients’ terms and conditions of business and advise whether changes or improvements should be made.
Make sure your credit terms with clients are agreed in advance and if they are extended that this is also documented if you are considering a proposal for an extension of credit terms, seek something in return such as security, interest or other charges.
Where your terms call for a counter signature and return, check this has been done.
Carefully check and keep under review the legal identity and credit risk of your customers. For example is it an individual, a partnership or a limited company?
Before you provide the goods or services, check the person you are dealing with has the authority to bind any company or partnership he or she represents.
Apply your terms of business and credit terms. For example decline to give credit where your customer has long outstanding debts in breach of your terms. Enforce any terms that provide for title to goods not passing until payment and make sure goods are not mixed with those of other suppliers. Where appropriate seek early return of goods where payment has not been made.
Try and improve your credit position by, for example, seeking pre-payments for new customers or for some or all of your upfront costs or shortening your credit period.
Get closer to your customers to better understand their financial position and whether they are likely to default. Think about visiting their premises to secure the relationship and gather intelligence.
Consider if some transactions (particularly with overseas customers) should be conducted on the basis of letters of credit, or other bank arrangement or bond.
Take early action to recover outstanding debts. If customers are not paying you, they are likely not to be paying others; the creditor who applies the greatest pressure often gets paid first.
Contact Nina Benest to talk through your specific requirements.