Struggling to get customer to pay

[Ben Anderson]

The customer has been claiming they have been struggling with their health and have been in and out of the hospital with some serious issues (you can never be sure if this is a lie, I am 90% sure he sounds pretty genuine about it).

They have signed multiple contracts with me (luckily I make all customers sign a contract agreement before I start work). I have provided them with lots of work and lots of my time (big money work). My services are based upon a pay monthly website service (I have learnt from my mistake, I should have charged some kind of deposit or upfront fee before starting on large jobs like this!).

They have pushed back the launch date tonnes of times, we are now getting to 5-6 months mark and I still haven't been able to launch the website. He asked while in the hospital to put everything on hold, we agreed to £250.00. I haven't received it, so I am now getting slightly concerned. However, but is claiming that he is struggling to get the money to me as he's in hospital and has no way to getting it to me (which could be a genuine point). He said that hes tried to get a friend to do it but they wont.

He could be genuine but I am running a business, not a charity. What would you do in my shoes next?

 

[STDFR33]

Letter before action letter, followed by a claim if they don't cough up.

 

[Lovetts Solicitors]

If the debt is just £250 then it's unlikely to be worth legal action as the time you'll spend on this is probably worth more to you than the debt!

However there's nothing to stop you sending a Letter Before Action or using a Pre-litigation (also known as Pre-legal) firm. Typically the former would be fixed-fee whilst the latter is usually on a commission (percentage of what is recovered), although do check if there's a minimum commission payable.

We can offer either service, a letter before action from a solicitor can be particularly effective as it shows you are really serious.

 

[Michael Gerard]

If your claim is only for £250, do not bother with a Letter of Claim, just instigate recovery via the small claims track.

I understand where Lovetts is coming from, but I would disagree that £250 is unlikely to be worth legal action, especially where a business regularly deals in small amounts as several clients owing a business small amounts soon add up, plus the small claims track is intended to be for the DIYer.

 

[Lovetts Solicitors]

If you're able to DIY it efficiently then legal action is certainly an option - we just wanted to be clear that you'll need to take a commercial decision on the time cost vs what you'll get back, and often it's just not worth it. However we do often come across clients who pursue smaller debts anyway, often because it sets a clear precedent to your clients that any debt, no matter how small, will be pursued.

We'd still recommend sending some sort of Letter Before Action (what Michael refers to as a Letter of Claim) before you start the legal process. This doesn't have to be complicated - simply a letter which sets out what you are owed and why. This is required under the Pre-Action Protocol which are the rules you are supposed to follow before starting any legal proceedings, and it's intended to give the debtor a final chance to pay before you go to court.

 

[Ben Anderson]

Thanks for all your advice. What should I do about all the contracts he has signed. He has signed about 3 or 4 contracts with me to make monthly payments over a certain period of time? Not sure what to do about those?

 

[Ben Anderson]

.. Also just to add I don't really want to get into having bad relationships with clients. Should I maybe ask him for hospital records to prove he is actually having treatment? But then its not really my problem. This project has been delayed so much it's crazy or should I just go for it and start taking some proper action?

 

[Chris Ashdown]

If he has missed one payment after say 30 days then i would consider the agreement null and void and go for the lot after a letter explaining my reasons and via small claims

 

[Ben Anderson]

Thanks Chris for your reply. This has been going on for ages. Would my best bet to offer a 30-day warning or should I simply get my solicitors to send a Warning Before Action letter?

 

[Awinner2]

There used to be legal forms that a claimant could fill in themselves which could be used either for individuals/partnerships or a different form for limited companies. The form basically told the debtor that they had 28 days to either pay in full, come to a mutually agreeable arrangement to pay, or contact you to discuss any issues. The form also told the debtor that if none of the 3 things were done, on day 29 you could apply to the Court who would make bankruptcy orders or winding up with no appeals allowed.
In my business I used the form against a very large brewery company that was giving me the run around over an invoice for equipment supplied but not paid for after 5 months. Strangely I was paid for work done before and after but not this one. Fed up with getting the run around on the phone, I sent the form to the registered office. 3 days later got a phone call from the Finance Director. Nice conversation, he said could I give him a few days to investigate? Their cheque arrived 4 days later with a note from him saying please call him to confirm receipt of cheque. I did so and he asked me "could I let him know where to get the forms from"!

I don't know if this is still part of the legal system but I think the forms came from Oyez Stationers?

 

[Michael Gerard]

Awinner2 is talking about statutory demands, which can easily be downloaded from the Justice website.

There are 2 statutory demands, one that is issued and served on a limited company (for winding up purposes), and one that is issued and served on an individual (for bankruptcy proceedings). However, it is not quite as simple as Awinner2 sets out, although they can be powerful documents.

 

[Awinner2]

Thanks for clarifying that Michael Gerard. I wondered if the system still had statutory demands! I must admit, that as a layman I found them incredibly effective. I never had to follow through as the mere sending of the form was very effective at getting paid! I had never heard of them until I attended a local Chamber of Trade meeting on Managing The Sales Invoicing nightmares!

 

[Ben Anderson]

Thanks for all your help. I have initiated action through small claims court. I believe it's highly likely he won't cough up or reply. I am just wondering what happens after? If I win and need to take something like bailiff action. I have his office address which is probably a virtual office, how would I get his actual address? Thanks