Dealing with disputed invoices can be challenging, especially if your customer is squabbling simply to avoid payment.

The most important thing is to take time to understand what the dispute is. Then, isolate and seek to resolve the issue as quickly as possible. If you believe the dispute is bogus, explain your reasons and press on with enforcement proceedings.

It’s essential that you act swiftly because you want to get paid. When you’re tolerant with overdue invoices there’s a danger that you may lose all of your money. The company you’re chasing could be insolvent, struggling on its last legs, and simply robbing Peter to pay Paul.

Disputed invoices must dealt with urgently because you don’t know if the company is doing the same thing with other suppliers. Never sit on a dispute because it won’t simply go away.

Still, you don’t want to magnify the problem by throwing oil on the fire or fanning the flames. When someone says they’re not paying, it’s very easy to become irrational, hot-headed and start exchanging threats.

Before you know it, you’re trading accusations, the issue remains unresolved, and no one’s suggesting a way to end the dispute.

Ask the customer to set out their dispute in writing

Avoid this and get straight down to business. Ask the customer to clearly set out their dispute in writing, supported with whatever documentary evidence they have.

You can give them 7 or 14 days (or less) to respond. If they reply without any documentary evidence there’s probably no need to take the dispute seriously.

Also, never accept a dispute verbally over the telephone. Always ask the complainant to articulate their dispute in writing. A person with a genuine dispute can do that. Someone with a spurious claim will struggle, unless they’re going to manufacture a dispute.

If the response comes back with supporting evidence; deal with the disputed invoices straight away. Grasp the issue and address it quickly. Sometimes you may have to concede some form of value (monetary amount of the invoice) in order to get paid, that’s just business.

To avoid these types of issues, it’s always best to ensure that your agreement terms and conditions clearly set out the process for dealing with disputes.

Ensure that both parties agree to the terms before trading takes place, so if there is a dispute they’ll automatically submit to the process set out in the agreement.

Disputes can be complex and it’s sometimes easier to let a third party handle these issues while you concentrate on running your business. For more information, visit our 123Pay credit management page.

The post How to deal with disputed invoices first appeared on Company Debt Recovery.

Issuing a Statutory Demand (or Stat D) is an effective way to encourage prompt payment of overdue invoices and debts, but it’s not the only method.

A Stat D is a formal document requesting payment of an outstanding debt within 21 days. By issuing one, you give creditors another 3 weeks to pay a debt that’s already overdue.

In that time, if the debtor is a limited company with debts; the director(s) may consider a formal insolvency procedure.

Try to avoid this because creditors in Company Voluntary Arrangements may get 30% of what they’re owed over 5 years. In a Creditors’ Voluntary Liquidation it’s likely they will end up with nothing.

Bizarrely, issuing a Stat D may deter a company director from paying quickly. 20 days after it’s been issued, they can file in court a Notice of Intention to Appoint an Administrator.

This acts as a moratorium preventing creditors from taking oppressive action against the company for 14 days. After 2 weeks, the director is free to repeat the process.

Breach of payment terms

Filing 2 notices buys the director(s) extra time in addition to the 21 days offed by the Stat D. Despite breaching your payment terms, they may have benefited from 7 weeks of interest-free credit.

In these circumstances, director(s) have 21 to 49 days to consider their options. During that time, they can easily remove assets from the company and place them beyond the reach of creditors.

And this is the primary reason why it’s sometimes best to avoid Statutory Demands if the debt is undisputed.

If you really want companies to pay swiftly, ensure your initial contract with them includes a watertight enforcement provision. This should inform creditors that you may take action 14 or 28 days after the due date.

Once this provision is included and the specified period has elapsed, you can refer them to the provision and say:

“If this debt remains unpaid after 24 hours, I may petition for the Winding-Up of your company.”

As soon as the court issues your Winding-up Petition, Section 127 of the Insolvency Act 1986 comes into effect. This forbids directors from taking several actions, including making payments from the company’s bank account(s) without first obtaining the court’s permission.

But there’s no guarantee their application will be granted. So the director must pay the invoice immediately if they want to regain control of the company’s assets.

Whereas Stat D’s offer a 21-day reprieve; an enforcement provision accompanied by a 24-hour notice motivates debtors to pay faster.

The post Stat Ds and undisputed, but overdue invoices first appeared on Company Debt Recovery.

Sometimes, you may need to issue a County Court Judgment (CCJ) or a Winding-Up Petition on an insolvent company that owes you money. But what’s the difference?

County Court Judgments usually come about when a company refuses to pay an overdue debt. The creditor (claimant) who’s owed money commences proceedings by visiting the Government’s website, and issuing a County Court claim online.

In many instances, if the debtor (defendant) fails to respond, the court may grant the claimant a default judgment order.

If a defendant provides a good reason, a default judgment can be set aside. For example: they couldn’t offer a defence because they never received the summons.

If the court is satisfied with the defendant’s application, the claim will proceed to a trial so it can be tested. Claimants would be unwise to oppose a defendant’s application as everyone has a right to defend themselves.

Sidestep the county court

A claimant with a judgment debt is free to issue a Winding-Up Petition to enforce payment. But if the debt is undisputed, they can sidestep the CCJ and petition for the debtor-company to be wound up.

The issuing of a Winding-Up Petition immediately triggers Section 127 of the Insolvency Act 1986. This forbids directors from taking several actions, including making payments from the company’s bank account(s) without first obtaining the court’s permission.

For example, directors may not use the account(s) to pay for a customer’s coffee during a business meeting. As a result, they must pay the debt quickly to regain control of the company.

After applying online for a County Court claim it may take 7 days for the summons to be dispatched. The defendant will then have an additional 28 days to file an acknowledgement of service, and a defence.

It could take 6 months for the defence to be tested in court. Crucially, they will have the benefit of the claimant’s money during that time.

In contrast, if you decide to wind-up the company, the issuing of a Winding-Up Petition costs around £3,000 including legal fees, insolvency expenses, and other disbursements. But you’ll get to claim that sum back when the debtor pays.

Winding-Up Petitions are useful when dealing with insolvent companies. But the insolvency courts must never be used as a debt collection instrument because that’s an abuse of process.

The post CCJs, winding-up petitions and undisputed debts first appeared on Company Debt Recovery.

Pre-action letters and Statutory Demands (also known as Stat Ds) are useful tools for chasing longstanding and undisputed debts. But how do they differ?

Firstly, the names of the participants involved.

Whoever issues the Statutory Demand is an ‘applicant,’ but the sender of pre-action letter is a ‘claimant’. Likewise, the recipient of Stat D is a ‘respondent,’ but someone who receives a pre-action letter is a ‘defendant’.

Secondly, Statutory Demands and pre-action letters have completely different outcomes.

A pre-action letter is a formal notice requesting payment of an overdue debt within 14 days. Ignoring this letter results in civil proceedings, which is a County Court money claim.

In contrast, a Stat D informs the respondent that unless the debt is paid, insolvency proceedings will commence.

Responding to a Stat D

Statutory Demands are precursors to formal insolvency proceedings, and can lead to the Winding- Up of a company or person. There are 3 main ways to respond to a Stat D:

1. Arrange to pay all or part of the debt
2. Dispute the debt either partially or completely
3. Pay the debt swiftly.

Similarly, an application may be submitted to the court for a Winding-up Petition if the debt is:

1. Undisputed
2. £750 or more
3. Unpaid after 21 days.

After 3 weeks, the applicant is free to issue a Winding-Up Petition because they now have evidence of insolvency.

A respondent who disputes the debt must reply in writing within 21 days, setting out their grounds for contention. If this is followed by an invitation to withdraw the Statutory Demand, the applicant must oblige.

An applicant may issue a Stat D for a debt that’s less than 6 years old.  Legally, if they want to bankrupt the respondent, a Stat D must be served first. But this isn’t always necessary when Winding-up a limited company.

The post Statutory Demand vs Pre-action letter first appeared on Company Debt Recovery.

This is particularly bad news for roofers, plumbers and other subcontractors (‘subbies’). Why? Because in a competitive market, lead contractors sometimes take advantage of their vulnerabilities and avoid paying them.

In an attempt to increase profits, they often put forward lean budgets when tendering for work. For example: a large construction company may offer a bid of £900k to expand a local authority secondary school, knowing the job will cost £1m.

Once they get the contract, cost-effective roofing, plumbing, electrical and gas subbies are called in to reduce the expenditures to £800k, thus creating £100k in profit.

Some lead contractors have no intention of settling invoices. They find fictitious faults and reasons to withhold payment and can generate additional profits by repeating this process with multiple subcontractors who effectively act as their de facto bankers.

To be fair, this practise is not endemic, but an established subbie will have found themselves in this situation on at least one occasion throughout their career.

The funny thing is; we all know that you can have a solid, 30-year relationship with your bank, but if you were to ask them for an unsecured loan of £30k, they would say ‘no,’ and probably want a mortgage on your assets for collateral.

Yet, every day, traders up and down the country leave themselves completely exposed by giving away their labour and materials in return for a promise of payment in 30 to 60 days.

This is generally how debt is created, and the reason liquidators and administrators have such little regard for unsecured creditors, who they consider ignorant.

How to deal with clients who won’t pay

What can subbies and tradesmen do to ensure they are paid promptly for work completed and recover unpaid debts?

Firstly; they must tidy up their paperwork and make sure invoices clearly state that:

1) All queries must be raised within 14 days of receipt of an invoice.
2) All undisputed invoices overdue by 14 days may be subject to insolvency proceedings.

A subbie who has completed all their work in accordance with the contract and issued an invoice, which is undisputed and overdue, may consider issuing the creditor with a winding up petition.

Although winding up petitions should not be used as debt recovery instruments, they are a viable option, especially if a lead contractor has exposed you to unnecessary losses and used their credit terms as an interest-free, unsecured funding facility.

Once a winding up petition has been served, the creditor will act swiftly to resolve the problem; get the petition withdrawn; and avoid having their bank accounts frozen.

Call today on 020 7504 1300 or click here: https://companydebtrecovery.co.uk/our-services/issue-creditors-winding-up-petition/  for confidential and free advice on how to present your debtor with a winding up petition.

Image credits:
http://watchdog.org/59330/nv-schools-got-470m-for-construction-may-get-more/

The post How should builders and tradesmen collect overdue debts? first appeared on Company Debt Recovery.

This figure which is up 8% from last year and a huge 36% from 2011 is considered conservative as it was taken from only 180,000 SME’s across the country who have submitted detailed annual accounts.

As the British economy recovers it seems that SMEs are the ones who are feeling it in the pocket. The average payment date of invoices is now 72 days where as in 2009, during the peak of the recession, the average time was 61 days.

Theories abound that whilst the economy has become more stable small companies are happy to extend payment terms and willing to wait for payment.  This contrasts  with the recession years when they were more likely to consult recovery experts or take legal action to recover outstanding payments in case the debtor went into formal insolvency proceedings.

The ABFA believes that businesses should not view the debts as a hindrance on their cash flow but should be used to unlock funding from banks or factoring companies.

“The scale of unpaid invoices to Britain’s SME’s has become enormous but there is no reason for it to become a barrier to investment and growth.  Businesses need to recognise that their unpaid invoices are an asset.  Often they are the most valuable asset for an SME and they can be the key to unlocking critical and affordable funding.”  Said Jeff Longhurst, Chief executive of the ABFA.

Peter Murray, Director of Insolvency & Law, believes “SMEs who supply their customers should not have to plug the funding gap by extending their credit facilities beyond usual terms.  It is the role of lenders to sufficiently fund their customers and not SMEs.”

“Regrettably, this is what happens because SMEs are more entrepreneurial and take huge risk to grow their businesses.  They have become the bank of first choice for their customers by extending credit terms because, in effect it’s an unsecured interest free loan facility offered by SME Bank PLC “

Construction & Manufacturing most affected by unpaid invoices

As reported by Insolvency & law before, the sector which suffers the most and has the highest value in unpaid invoices is construction and manufacturing.

Overdue invoices stands at £7bn currently which is just over 16% of the sector’s annual turnover.  Other research shows in the construction sector, subcontractors wait an average of 107 days for payment of invoices.

This has caused serious problems for subcontractors who receive late payment from contractor companies.  Affected subcontractors would then struggle to continue with their contractual obligations without the necessary flow of cash to meet labour and materials costs.  It is at this point that subcontractors face the prospect of becoming insolvent at the expense of the contractors.  This would have been caused by the involuntary funding arrangement extracted by the contractor from the subcontractor though late payment of invoice.  In others words subcontractors forcibly funding their contractors at great risk to themselves.

Peter Murray, who has worked with hundreds of construction SME’s, in the management of debt recovery and insolvency, spoke on the difficulties SMEs experience having to constantly provide involuntary extended credit terms to their contractors.  Murray continues “Each week we receive winding-up petition instructions from subcontractors.  A winding-up Petition will force a defaulting contractor to demonstrate it is not insolvent and this is best achieved with a payment of the petitioned debt to its subcontractor or face the prospect of being wound-up by the court.”

If you are a construction SME or contractor and face difficulties recovering money owed to you from a debtor, contact Insolvency & Law for free advice on 0207 504 1300

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www.fionarobertsongraphics.co.uk

http://www.bluehub.co.uk/

The post Construction sector suffers the most as UK SME’s are owed £67bn in unpaid invoices. first appeared on Company Debt Recovery.

The government wishes to help stimulate cash flow in smaller business and encourage them to thrive and grow. It is estimated that at any one time more than £26bn is owed to small businesses from larger firms. Anna Soulby believes that this severely limits business growth and ties up the company’s cash flow. It also potentially can lead to more expenditure, such as legal costs, in order to recover money which is owed.

The initiative to come to this decision has been spearheaded by the Federation of Small Businesses, who in 2014 carried out a survey among their 200,000 members and found that more than 51% had experienced late payment problems in the past 12 months.

Peter Murray from the firm Insolvency & Law, which assists small businesses recover money from large firms had the following to say on why small businesses extend payment terms with larger firms and the dangers of doing so… “Smaller businesses are keen to grow their turnover and larger customers provide that opportunity. However, due to competitive forces smaller firms enter into extending credit terms to larger customers that are usually unfavourable to the supplier. Also, larger customers exert what they believe is their divine right to take twice as long to pay their smaller suppliers. In essence it is the smaller suppliers that are fuelling the growth of larger companies by involuntarily bank rolling them with 90 and 120 days credit terms, sometimes even longer.”

Ms Soulby believes that this new role should create an even playing field between big firms and smaller suppliers. “The small business commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table and sort out disputes at a fraction of the cost of going to court.” She stated.

“It will also provide advice, investigate complaints and see where further action is needed to clamp down on unfair practices,”

The Small Business Commissioner will have the authority to reinforce existing payment agreements between suppliers and
if necessary publicly name and shame the transgressors.

Unfortunately the new commissioner would not have any legal authority to force the larger firms to pay out to their creditors, which has been viewed with skepticism by some members of the Federation of Small Businesses, including Liesl Smith who is the Head of Communications:
“The new role must have influence and credibility. It also needs to be resourced properly otherwise the role will lose integrity among the business community.” She said when speaking to the BBC earlier this month.

Peter Murray believes that it could be a case of all bark and no bite for the new commissioner “It is difficult to comprehend how having such a Commissioner will bring about any real, beneficial change unless statutory powers is given to the Commissioner. Those powers would be to impose fines on large companies who pay their smaller suppliers late and take other advantage such as disputing what they owe on dodgy grounds, as a means to prevaricate over their debts.”

Contact Insolvency & Law for any business debt issues- we will advise you on the correct course of action to take and help ensure that your business is protected from adverse Insolvency proceedings- 0207 504 1300

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www.independent.co.uk
www.exeterdaily.co.uk

The post Small Business Commissioner to help firms recover billions of pounds from late payments first appeared on Company Debt Recovery.

Just over 70% of small, medium and large UK construction firms write off an average of £10,000 per year. Often firms have to write off the debt completely, settle with a significantly smaller payment or wait prolonged periods of time for full payment. This is all whilst the debtor either carries on trading as normal or ends up entering into a statutory insolvency procedure and leaving its creditors in the wind.

Peter Murray whose firm, Insolvency & Law, specialise in presenting winding up petitions and statutory demands upon debtors in the construction and contracting industry had the following to say:
“Sadly these figures are unsurprising. A significant amount of my clients are in the construction or contracting industry and some have almost lost their businesses and livelihoods through bad debt and companies prevaricating on payments for finished jobs.”

“A recent client of ours was waiting for over 2 years before we managed to intervene and advise them on presenting a winding up petition.”

Helen Wheeler who is in charge of the construction finance sector of Bibby Financial Services spoke on the repercussions to the creditors of the unpaid debts:

“Many of the businesses we speak with have suffered bad debt which have significantly hindered their ability to pay workers and suppliers. In many instances these bad debts have forced viable business to enter into insolvency.”

Peter Murray believes that often times the larger contractors who hire the smaller firms for jobs are the causes for a majority of the issues which subcontractors face:

“I have heard rumours from some of our clients who have been in very precarious circumstances because of a large contractor, that they will create disputes specifically to delay payments time and time again. This is a common tactic used and it has a detrimental effect on the subcontractor’s cash flow.”

One of Insolvency & Laws clients, Warburton Building Contractors, recently was involved in a dispute over a retention fee with a large contractor. Paul Burt, the company CFO, spoke openly on common issues that they have faced:

“In the construction industry we suffer a lot with retentions being held at the end of projects and it becomes very difficult to get that money for up to a year after the project is finished. “

“You find yourself up against big organisations and you end up scrambling around to find out who can certify the outstanding money. Very often they pass you around to different people in the organisation and then when you finally think you are getting somewhere they create a dispute so that they don’t have to pay you”

Paul Burt of Warburton contacted Peter Murray at Insolvency & Law when he was faced with a difficult debtor who was refusing to pay their significant retention fee:

“We worked for a contractor and completed a project of approximately £1million. We then came to the end of the defects liability period and we had been chasing the retention fee for about 6 months and we had lots of promises of payment. Unfortunately none of those promises were fulfilled and we needed to find an expert who could help us get our money in.”

Peter went about advising Paul and Warburton that the best way to handle the situation was to present the client with a winding up petition as the company was clearly insolvent.

Fortunately for Warburton, once the petition was presented the client decided to pay the debt.

“Presenting a winding up petition is the most affective route we advise clients to take here at Insolvency & Law” stated Peter.

“If a company is cannot pay an invoice as and when the invoice falls due, then that company is considered insolvent according to the Section 123 Insolvency Act 1986. If they wish to prove that they are not insolvent then they must pay their creditors or risk having their bank accounts frozen and potentially losing it all.”

Paul Burt was very happy with the service he received from Insolvency & Law and recommends their services on to other construction and contracting firms.
“Peter really seemed to understand what we needed and offered us a cost effective solution to get our money in.”

“Having used solicitors in the past, Insolvency & Law provided a much more efficient and cost effective solution. Peter’s expertise was very helpful and we will continue to use their services as and when we need to”

*Images Via http://www.dailymail.co.uk/home/index.html& http://uk.reuters.com/article/uk-britain-construction-idUKBRE8BD0A920121214

The post The UK construction industry writes off £2bn annually of bad debt first appeared on Company Debt Recovery.

Salford City Reds or the Red Devils as known by rugby fans, who currently sit mid table of the Rugby Super League, have been hit with a winding up petition from creditor, Konica Minolta, and have a court hearing date August 10th.

The Club have responded quickly by moving to dismiss the existence of any financial issues by releasing a statement saying that they have contacted Konica already and are awaiting a response from them.

This is not the first time that the Club have faced a precarious financial future. In 2010 a winding up petition was presented by former Club sponsor Steuer Gregsson limited. This matter was later resolved outside of court. They also become the subject of another claim from HMRC for a large outstanding tax bill, which again was later resolved.

The Club is in safe hands

The Club’s current CEO, Martin Vickers, believes that the club is being managed carefully and has a bright future based on the levels of investment from current owner, Marwan Koukash, who is a businessman and racehorse owner.

Speaking to the Manchester Evening News, Vickers had the following to say

“In understanding the reality of the Club’s position, fans need to view the Club’s accounts which show unprecedented levels of investment in a Super League Club by the Club’s owner Marwan Koukash,”

“The Club would also wish to confirm that 100 per cent of the debts of the former club are being paid in full, including those to the council”.

The I&L View

Peter Murray, whose firm Insolvency & Law are experts in issuing and defending winding up petitions had the following to say on the matter…

“Now the winding up petition has reached public domain the Club’s other creditors may decide to join the petition as supporting creditors. This would prevent withdrawal of the petition and force the Club to settle the debts claimed by those supporting creditors if the petition is to be dismissed by the court and the company remains in its pre-petition state.”

“When a company becomes the subject of a winding up petition every effort should immediately be taken to ensure its withdrawal before it enters public domain. Once other creditors receive knowledge of the petition matters for the company will very quickly become much worse and that is why immediate action is necessary”

Photo Credit: Manchester Evening News and The Guardian

The post Rugby super league team issued a creditors winding up petition first appeared on Company Debt Recovery.

Winding up petitions issued by creditors against firms based in Central London increased by 39 per cent in October 2010 compared with 10.5 percent in the rest of the country, a new study has revealed.

The increase is simply a reflection of the government cutbacks and will probably continue throughout 2011.

It’s also evidence that creditors are no longer turning to the county court to recover debts; they’re going straight to winding up because it’s a more compelling method of collection, although it is an abuse of court and legal process.

Winding up petitions can be an effective debt collection tool, but only if they’re served correctly.

An appropriate example came last summer when I was contacted by a client who’d received a winding up petition from a firm of solicitors and was due in court in three weeks.

In order to comply with insolvency rules, proceedings for a winding up petition must be advertised in the London or Edinburgh Gazette at least 10 days before a hearing, which didn’t leave much time for the law firm to act.

I contacted the solicitors on behalf of the client to negotiate payment terms and asked them to discharge the debt and not advertise the petition in the paper on the grounds that once advertised, it cannot be withdrawn and the recipient’s bank accounts will be frozen leaving them without funds to pay the debt.

The law firm agreed, but in doing so broke insolvency rules (the winding up petition must be advertised).

As a result, if the client failed to make any payments before the hearing, the winding up petition was invalid and thus unenforceable; allowing them to pay the debt at a later date and continue trading.

Are you being served? If so, contact Insolvency and Law now for confidential advice and guidance. Call 0207 504 1300.

The post Winding Up Petitions Increase, But Are They Being Served Correctly? first appeared on Company Debt Recovery.