There are a lot of things that can land a new business in hot water, but it usually comes down to cash flow. As a small business, it’s crucial that you manage your finances well to ensure that you always have a constant flow of cash and you are able to cover your overheads. Unfortunately, that can be difficult if your clients don’t pay up on time.
All businesses have to deal with people that pay late at some point and occasionally, clients will be difficult about it. Usually, you can refer back to the contract, chase them up a bit, and they will pay. But what do you do if they refuse to pay and, even worse, they disappear and you can’t get hold of them anymore? If you don’t recover that money, your business has lost out, but how are you supposed to do that if they stop communicating with you? In this instance, it’s best to take legal action. These are some of the main options you should consider.
Give Them One Final Warning
Firstly, you need to track them down and give them one final warning before you take any legal action. If they are avoiding you and you don’t have contact details for them, you may need to hire a private investigator to find them for you. When you manage to get hold of them, send them a formal letter or email letting them know that they have one final chance to pay the money that is owed before you take legal action. It’s much easier for everybody involved if this can be settled amicably, so give them one last opportunity to do so. If they don’t go for it, you need to start looking into other options.
Find A Debt Mediator
At this point, you can still avoid taking them to court if you are able to settle things. But you clearly haven’t managed to reach an agreement on your own, so you should consider finding a debt mediator to help you. They will sit down with all parties involved and work with you to come to some kind of compromise. If the client is refusing to pay because they can’t afford it, you can work out a payment plan of some kind. If there are disputes about the amount owed and the terms of the contract, the mediator can help there too.
County Court Proceedings
If the mediator doesn’t work, the next step is to issue county court proceedings against them. This is the first step in the process and allows you to take further action if the debt is not paid. If they do not pay in 14 days or make an arrangement with you regarding a payment plan, a county court judgment will be issued against them. This then gives you the legal power to send bailiffs to collect the debt or serve further notices, like a statutory demand or charging order.
Ideally, you should avoid taking legal action because it costs time and money for everybody involved. However, your business relies on that money to survive, so don’t let people get away with not paying you.