What can you do if your business is owed money?

By Amanda Hamilton, Chief Executive of the National Association of Licensed Paralegals (NALP)

Unfortunately, unpaid invoices and being owed money is something every business has to deal with. And there are times when it is necessary to involve the courts. But a word of caution: before going down this road, ask yourself if this debt is really worth the time and energy required to collect it, if you stand a good chance of receiving the money (ie can the other party pay) and if you are genuinely willing to take it all the way to the courts. If the answer to any of the above is ‘no’, then, frustrating as it may be, it can sometimes be better to write off the debt and move on with your life.

However, if you don’t want to do this, what should you do?

One option is to approach the other party by making ‘gentle’ contact to say that this invoice/debt is outstanding, and while you understand that times are hard, would there be a possibility of paying it off by instalments? If they are amenable and accept that the money is outstanding, you can then negotiate a regular payment that would be acceptable to both parties. After all, if you decided to take the huge step of taking that person or business to court, and you win your case, ultimately, the court would ask the debtor that very same question: ‘how much can you afford to pay monthly?’

For the ‘soft’ touch to be effective, negotiation is the key, but if this doesn’t work, then you have the option to institute court proceedings.

The first step is to give the other party as much notice as possible that you are owed this money and to ask for payment. There is a ‘pre-action protocol’ that you must do before any court proceedings are commenced, which is otherwise referred to as a ‘letter before action’, which must state who you are and why you are asking for the debt to be paid. It could be money owed for services rendered and an unpaid invoice (eg decoration or gardening) or it could be for not fulfilling a contract. Whatever the reason is, you must put all the relevant details in a letter and include with it any evidence such as a fee invoice that you submitted, or a copy of a contract signed by both parties etc.

The letter should also give the other party a timeframe to respond either to make payment in full, or to make contact to negotiate how to pay it off. The letter should also make it clear that you are open to discussion, but that if you have not had a response by the chosen date, then you may decide to commence legal proceedings without further notice.

You should always ensure you have sufficient evidence and reason for taking court action before you commence a claim.

Starting court proceedings can be done online if it is a fairly straight forward small claim without complications. And online fees to do so are slightly less than sending in paper versions. The fees go on a sliding scale dependent on how much is owed. For example, for claim amounts from below £300 up to £1500, the court fee is between £35-£70 if you issue online – a little more if not. Claims worth over £1500 up to and beyond £10,000 cannot be issued online and the fees range from £110 – to 5% of the claim for any that are over £10,000.

The claim form should be completed and usually once stamped by the court, a copy gets sent to the other party, a copy is kept by the court, and you get the third copy. The court usually sends the issued claim form to the other party (the defendant) with a response pack containing a number of documents and information on the options that the defendant can choose: to pay the debt in full, to acknowledge service of the claim form and indicate that they want to defend, and various other options. However, whatever the defendant decides to do, they must contact the court within 14 days, failing which, you may have the right to get a default judgment against them.

Further details on how to make a claim and the fees can be found at: https://www.gov.uk/make-court-claim-for-money/court-fees

Although the small claims system is relatively straightforward, if you feel you need assistance, you can always call upon the services of a paralegal who will be able to help you at a reasonable cost. You can locate one on the National Paralegal Register: https://www.nationalparalegals.co.uk/national-paralegal-register/


Amanda Hamilton is Chief Executive of the National Association of Licenced Paralegals (NALP), a non-profit membership body and the only paralegal body that is recognised as an awarding organisation by Ofqual (the regulator of qualifications in England). Through its Centres around the country, accredited and recognised professional paralegal qualifications are offered for those looking for a career as a paralegal professional.

Web: http://www.nationalparalegals.co.uk