Gosport businessman Peter Darcy told BBC Radio Solent last week that, when it comes to non-payment of invoices, “there are businesses who do it on purpose and like to make you wait”.
Mr Darcy runs a business training services provider, and explained that one former client of his contacted him about some testing for their employees, without even realising that they had not yet paid him for his services provided three years ago.
“At the moment I’m waiting for a big shopping centre to pay after three years. They even got in touch recently and said they had some retests to do but, when I said they still hadn’t paid me for the first job, they couldn’t find any record or even the right person to ask. I don’t think I’m going to get paid that one,” he said.
You’re in the right
Firstly, it’s important to avoid falling into this kind of defeatist attitude.
Just because the client refuses to pay, it doesn’t mean they don’t still owe you the money, and you should make sure you have a clear contingency plan in place to pursue non-payment.
However, Mr Darcy’s comments highlight some other important points that are hard to achieve after the fact.
It’s not surprising that, if a client has got away with not paying an invoice for an extended period of time – particularly a year or more – they will eventually claim to have no record of the original work.
You can prevent this from becoming a means of escaping payment by making sure you keep records of all the work you carry out – either on paper, or by email.
An email confirming that work has been agreed and delivered should be enough to support any claim of non-payment, although you may want to go further and have your clients sign contracts if you’re delivering a high-value service with a strong risk of non-payment.
Pursue claims promptly
The longer you leave it before chasing a client for non-payment, the harder it can be to prove what they owe you.
In principle, the full amount remains outstanding, and you may even be able to add interest if you take them to court.
However, it should be easier and less costly, at least in terms of time taken, if you chase them for payment as soon as the invoice deadline passes.
Keeping the line of communication open from the date you issue the invoice until it is settled gives you a clear paper trail if the client claims to have no record of the work.
You should also try to keep a fixed deadline in place by which payment should be received – possibly allowing an extension to trusted or valued clients, but not permitting payment to roll over indefinitely without further action.
Company directors have a responsibility to act in the best interests of their firm – and generally speaking, that should mean they’re keen to avoid unnecessary legal proceedings.
If you have a client delaying payment on a large invoice, you might find that they do not take you seriously as an individual – but with the weight of a legal team or debt collection specialist behind you, things can change rapidly.
When all else fails, issue a letter threatening legal action, and you’ll often find the funds appear in your account within a matter of days.