That Light Bulb Moment: Top Tips for Non-Payment
With the restrictions in relation to the third national lockdown set to begin lifting in the coming weeks, for many organisations and individuals, this will be a further period, on top of the last year, of uncertainty and for some still little or no income.
Start-up and early-stage companies will naturally be concerned about the risks of uncertainty and non-payment of monies both upstream to their suppliers and landlords etc., but also downstream if their customers do not pay. For a variety of reasons, start-up businesses unfortunately often have no bargaining power due to their size and being perceived as the “new kid on the block”, they are often inexperienced in reviewing terms and conditions or negotiating terms of the contract and they may experiment with trading without having terms and conditions in place. In addition, their cash flow position may also mean they cannot chance late or non-payment as this could result in them going into administration or having to raise additional funds.
So, what can you do to ensure you are in the best possible position, should invoices, property rents, and contractual payments, etc. not be made?
(i) Ensure you know who you are contracting with? It sounds simple, but is the other party a limited company, a partnership, or an individual? Each represents a different risk.
(ii) Ensure your terms and conditions and contractual documents are all up to date and include everything which has been agreed between the parties. Don’t rely on verbal assurances which aren’t in the contract.
(iii) Ensure you fully understand both parties’ duties under the contract, what will happen in default, and how the contract can be terminated.
(iv) Establish as soon as possible the reason behind non-payment – again it sounds simple but, pick up the phone. Is payment genuinely disputed? Is it the case the party is not financially in a position to pay? Or is the party just avoiding making payment for no justified reason?
(v) If the reason for non-payment is because payment is disputed, establish why and consider whether a meeting between the parties could resolve the dispute or whether an alternative method of dispute resolution such as mediation could help resolve the matter.
(vi) If the nonpayer is not in a financial position to pay the debt in full, maybe because their business isn’t trading due to restrictions, consider a repayment plan. Any agreement to pay a debt by instalments should be recorded in an acknowledgement of debt and repayment agreement or at the very least be agreed in writing.
(vii) If it is a case of won’t pay without a valid reason or an agreed payment plan – contact us so we can provide you with some specific strategic advice in regard to the best way to try and recover your debt.
Jayne Smith is a Chartered Legal Executive in our Disputes team, she specialises in advising on debt recovery matters, creating bespoke strategies for clients which reflect the intricacies of situations. She is renowned for her professional and rigorous approach to pursuing debts and resolving disputes.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.