There is no escaping the fact that the disruption caused by Covid-19 is placing a huge strain on businesses across the country, particularly in those businesses operating in industries that have been hardest hit by the social distancing restrictions.
There are, however, proactive steps that businesses can implement into their working practices to mitigate these difficulties. We set out below some of our top tips to help businesses manage their cash flow and bad debts.
Your terms and conditions
Undertake regular reviews of your terms and conditions to ensure that they are up-to-date. Your terms and conditions should cover the following (non-exhaustive) legal points:
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- Payment terms (including provisions for default on payment);
- Terms relating to delivery of goods or performance of services;
- A limit/cap on your liability for providing the goods or services;
- The term of the contract and notice for terminating it; and
- Which law shall govern the terms of the contract.
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Critically, you must ensure that your customer receives a copy of your terms and conditions before you provide the goods/services. Printing your terms and conditions on the back of your invoices will not offer you complete protection – particularly if the invoice is only sent after the goods/service has been provided.
Battle of the forms
A common argument in legal proceedings is whether the seller’s or the purchaser’s terms and conditions apply. The basic position in this regard is that the prevailing terms will be the last version that was put forward before the contract was formed.
Continued supply to bad debtors
We strongly recommend that you do not continue supplying goods/services to debtors who are already significantly behind on their account. Whilst this can result in a difficult conversation with your customer, you should not shy away from it. If a customer needs you to supply more goods/services then you are in a strong position to require payment for outstanding invoices – and even to require payment up front for future supply.
Firm demands for repayment
Your final demand for payment to the debtor ought to be clear, succinct and firm. It should also include a final warning that you will engage solicitors to commence proceedings to recover the debt unless it is paid by a specific time.
Instructing solicitors
As a general rule of thumb, the older the invoice, the less likely it is to get paid. Therefore, the sooner you take steps to attempt to recover the debt, the more likely you are to get paid. Whilst no-one (except lawyers) enjoys finding themselves in an adversarial situation, it is sometimes unavoidable when faced with a stubborn debtor. You will be pleasantly surprised at how quickly a debt gets paid after a letter of demand has been issued.
Prosperity Law LLP specialises in recovering bad debts on flexible, low-cost arrangements. We understand that cash flow is essential to keeping your business afloat and whether you are owed a few hundred pounds or several thousand, we can help recover money owed to you.
For information on how we can assist you in debt recovery, you can call us on 0161 667 3686 or contact Cristina Rueda.
