How to Get Paid On Time

As reported in Business Matters last week, outstanding debts to small and medium-sized business stood at a record £35.3bn at the end of last year – and large companies have been identified as the main culprits.

It is always difficult for a small firm to get money out of a larger one, especially if the supplier is dependent on the customer for ongoing business.  But the longer you leave it, the more difficult it is going to be and there is always a risk of the customer going bust before you get your money.

In this video, Giles Dixon outlines the payment terms to have in your contracts:

All businesses, however small, should take steps to protect themselves and here is a checklist of points to consider.

• Before entering into a contract with a new customer, check their creditworthiness
• Make sure your contract clearly specifies when each payment is due and the amount or method of calculation
• Include in your contract terms that:

1. Give you the right to suspend and/or terminate the contract for non-payment
2. Entitle you to claim interest for late payment.[1]
3. Stipulate that ownership of goods and materials supplied remains with you until you have been paid in full
4. Issue all your invoices on time as stipulated in the contract

• Establish internal controls to monitor payments
• Send a reminder just before (or just after) the payment date
• If no payment received within a week, contact the customer
• Send a further reminder (with deadline for payment and reference to interest and possible action for recovery).

If you still do not get paid, consider exercising your contractual rights mentioned above and then moving into a more aggressive recovery process by:

• instructing debt collectors or
• instructing solicitors or
• commencing action in the small claims court or using the online court service – these are especially useful when there is no good reason for non-payment and you can file the claim yourself without needing a lawyer[2] or
• Serving a statutory demand (but take advice first, you should only use this method if there is no defence to the claim).[3]

However difficult it may be, try to maintain the relationship with the customer and do not rule out the possibility of a compromise if this is offered/can be achieved at acceptable level, especially if it includes the promise of future business.

Resources

ContractStore’s Business Terms & Conditions e-kit contains more information on this and other useful topics. Read more:  https://www.contractstore.comLPD231-business-terms-and-conditions-ekit