Is your business waiting on late payments? For answers to your questions about late payments, compensation and legal action, please consult the following FAQs. For additional information, do not hesitate to contact STA International.
Chasing Late Payments
When should I follow up on a late invoice?
When should I send an overdue letter?
Can I add a late payment fee to invoices?
How much can I charge on late payment fees?
The maximum Compensation Charges for late payments, specified in the Late Payment of Commercial Debts (Interest Act) 1998, are as follows:
Maximum Late Payment Compensation Charges
Invoice Value Late Payment Charge
+ You can also add 8% interest above the base rate.
What are my options if payment is still not made?
Can I still take action on recovering old debts?
How can I recover debts without damaging my customer relationship?
Discuss the situation in a friendly way and explain what steps you are entitled to take as per the payment agreement, including late payment charges, use of a debt collection agency, and potential legal action. This will ensure that they have a clear picture of what to expect if they continue to fail to pay. If they continue to delay payment, you should consider if this is the kind of customer you can afford to do business with.
What should I do if the customer claims I have not fulfilled the contract?
A level of service dispute might be less clear-cut and more difficult to resolve. If there are genuine shortcomings regarding your service that caused issues for your customer, you may need to aim for a compromise, which a solicitor will be able to advise you on.
If your attempts to reach a solution are rejected, you will at least be in a stronger position (as long as you can prove that you tried) if the case ends up in court than you would be otherwise.
When should I use a solicitor?
However, you should keep in mind that it can be more effective to keep the dispute out of the courts for as long as possible. Allowing the solicitor to negotiate payment in an amicable manner until there is no other choice should be the preferable option for all concerned.
What alternatives do I have before taking legal action?
One step you can take is to involve people higher up in the customer organisation, such as the finance director or any other relevant senior staff who might be able to influence the quick payment of the debt.
Additionally, you could emphasise a longstanding and amicable relationship where relevant to do so. State that you have supplied a high-quality service or product and you wish to maintain the mutually beneficial and friendly relationship you have had with the customer up to that point, and this may do the trick.
However, remember that there is only so long you can wait for payment to be made – provide an escalation date in your customer agreement and use it as described, whether it involves a debt collection agency and/ or a solicitor. Whatever the agreement, stick to it.
What legal options do I have?
- Debts up to £10,000 are assigned to the small claims track, which is a simple and relatively informal and inexpensive way of resolving financial issues in the county court.
- Debts between £10,001 and £25,000 are assigned to the fast track in the county court. This can be a complex and expensive procedure.
- Any claims over £25,000 are dealt with in the High Court, which uses the multi-track procedure. This can also be complex and expensive to follow through.
Additionally, any company that owes over £750 can be issued a statutory demand for payment in a specified format. If this payment is not made within 21 days, the court can be petitioned to wind the company up. This is a significant step that should not be taken without prior advice.
How long until I receive my late payment?
How should I prepare for a court case?
What are my options for 'enforcing Judgment'?
Your solicitor will be able to advise you with regard to which option you should take.
- Warrant of Execution
- If the customer has assets or goods that can be sold, a Warrant of Execution enables bailiffs to either collect money owed to you or seize those assets from their property to sell at auction.
- Third Party Debt Order
- If the customer has money in a bank or building society account, the Third Party Debt Order compels the bank to put the amount owed to you aside, and the customer is offered a hearing before it is paid to you.
- Attachment of Earnings Order
- If the customer is employed, the Attachment of Earnings Order is used to compel their employer to deduct a fixed amount from their monthly earnings until the debt is paid off.
- Charging Order
- If the customer has assets that could be sold, a Charging Order prevents them from selling them without paying you first.
How long will court action take?
Small claims will generally take about three to six months to come up with a hearing date, though the case itself will probably be resolved on that date.
Larger claims cases can be more drawn out – a fast-track case can take the best part of a year to come to court, while a multi-track case has been known to take as long as two years to get to trial.
Can I claim the court fees, issue fee, etc.?
The costs involved with large claims are significantly higher and even if you win the case, you’ll still probably have to pay at least some of your costs. If you lose, or if the judge doesn’t think you made enough effort to settle out of court, you will have to pay all of your costs and even the customer’s costs.
Can I report a disqualified director?
- Working as a company director or member of a limited liability partnership (unless the court has given them permission to do so)
- Involved in the promotion, management or formation of a company (unless the court has given them permission to do so)
- Acting as an insolvency practitioner
- Breaching any other restrictions as specified in a ban
However, you must provide information and evidence that backs up your claim.
How do I prove the company can’t pay its debts?
- A certificate of personal or substituted service that confirms you gave a statutory demand to the company.
- A bailiff’s statement showing that the full value of debt could not be recovered from the company’s assets.
Other evidence may also be accepted, depending on the court.
How can I wind up a company?
However, this isn’t a guarantee that you will receive any or all of the money you are owed, and it will cost a total of £1,530 (which may be repaid) to petition the court, so you need to be sure that this is a course of action worth taking.