What To Do When A Customer Is Refusing To Pay For Work Done In The UK – This is never good for the business and sometimes isn’t good for the customer either. It doesn’t matter if you run a small or medium-sized enterprise, a sole proprietorship, are self-employed, or are a freelancer; at some point in your professional career, you will encounter a customer or client who refuses to pay you for the work that you have done for them. Addressing this appropriately is critical. You need to stay well within the boundaries of the law but you also should consider what is fair and just and needed to keep your business running.
Table of Contents
If you have a straightforward invoicing procedure, you will be able to avoid the vast majority of disputes regarding payments, and any that do arise can be settled with a friendly reminder.
Where this is not possible, you should not be discouraged from pursuing legal action against a client who is not paying you for the work that you have done, even though the prospect of doing so can be intimidating. However, if you have sent reminders and been patient and professional, and they are still refusing to pay, there are other options you have.
Even the lawyers will usually encourage you to reach an amicable solution as, there is a risk, once they are involved, one loser can turn into two losers, and those losses can be even greater. It is no bad approach in any situation, however ‘right’ you feel, to try your best to put yourslef in the other persons position and to do that you need to take time to understand that. Always make sure you have all the facts. Document everything. Understand if this is a case of “Can’t pay” or “won’t pay”. If it is the latter, understand if that is because, from their perspective, they didn’t get what they thought they would. If the first time you hear that is with the lawyer, you may be losing money. Try always to be ‘reasonable’ in resolving those issues before you take the next step.
You are however deserving of payment for all of the work that you have done if it was agreed in a contract before and you have fulfilled your part- You will have earned it, and as a result, you are entitled to receive payment for it. You might be able to collect the debt without having to go to court if it is owed to a company and there is little room for disagreement regarding the facts or the evidence. On the other hand, there will be occasions in which you will be left with no alternative but to escalate the situation and take legal action.
The first thing you have to do is decide which court to start the proceedings in, and this decision will be influenced by the value of the claim. It is essential to select the appropriate court, and your options may change according to the following factors:
England and Wales
Different courts in England and Wales, such as the County Court and the High Court, have established a range of different maximum money value for claims that can be brought before them (which is very expensive and involves complex procedures). These maximum monetary values can be found on their respective websites
In Scotland, if your claim does not exceed £5,000 in value, you can use what’s known as the Simple Procedure to bring it before a Sheriff Court. If you are looking for more information on recovering bad debts in Scotland, take a look at the website for the Scottish Courts and Tribunals. If you are looking for advice on settling the matter outside of court, get in touch with Citizens Advice Scotland. The remainder of this article will refer to the system that is used in England and Wales.
Small Claims Online is a service that allows residents of Northern Ireland to file claims electronically through the website of the Courts and Tribunals Service, provided that the amount of the claim does not exceed £3,000. This section of the article will focus on the process that is followed in England and Wales; however, if you would like more information on how to pursue payment in Northern Ireland, you can read this guide to recovering debts that are owed to you.
The beginning of the legal process
DIY — do-it-yourself.
If the total amount of the lawsuit is less than ten thousand pounds, you may be able to file a “small claim,” which will be given to the “small claims track.”
The small claims track is a streamlined procedural system for attempting to deal with lower-value claims that is less formal and much more accessible to in-person litigants. This track is reserved for cases classified as “small claims.”
You can file a claim for a small amount both online or through the County Court. The fast track processing option is available for claims worth between £10,000 and £25,000. It also applies in County Court, where the procedures are, once again, relatively simple.
Putting in a claim via the internet
To address customers refusing to pay for work done In The UK, Claimants and defendants can use HM Courts & Tribunals Service’s Money Claim Online (MCOL), an internet-based service that is provided for them by the service.
Claimants and defendants could use this service to submit a claim for certain amounts of money rather than issuing litigation in court. This saves both parties time and money. Up to one hundred thousand British pounds’ worth of debts can be settled with this.
After you have first paid the related fee and then submitted a claim, you will be able to check the status of your claim online. This will be possible after you have completed both steps.
Additionally, defendants are given the chance to respond to the accusations and allegations that have been made against them.
Bringing a lawsuit before the court.
If you just want to resolve a minor dispute or file a claim, you don’t need a lawyer or a solicitor to represent you in court. However, if you do want to do either of those things, you have the option of doing them on your own rather than hiring a lawyer to help you.
If both the defendant and the complainant have indicated that they are willing to participate in mediation, the Small Claims Mediation service will be approached to handle the claim.
This will assist you in reaching a settlement that is acceptable to both parties.
Utilising the services of a debt collection agency
In order to recover the money that is rightfully yours but has been wrongfully withheld from you, you also have the choice of working with a debt collection agency. These organisations will work with you to find innovative solutions to the unpaid balances on your accounts, and they will work collaboratively with you to do so. Commissions are typically determined by deducting a certain percentage from the total amount that you are successful in recouping.
Even though the debt collection industry does not have the great reputation, there are still some trustworthy organisations that are active in the market.
Just make absolutely sure that you do the necessary research before choosing which agency to use, and be conscious of the fees that they could charge you if you decide to go with them which are generally around 10 percent of the debt.
The Credit Services Association is comprised of a large number of reputable organisations as members.
Unless you have a statutory demand or a court judgement in your favour, debt recovery agencies are also restricted in what they can do to help you collect on your debts.
Putting a Statutory Demand Into Effect
If a debt is not contested and the amount owed is greater than £750, a statutory demand can be issued for the debt (in the case of a debt owed by a company).
This is yet another method that can be used successfully to convince late payers to complete their payments in a timely manner. If a Statutory Demand is not disputed and payment is not made within 21 days of its receipt, you have the legal right to begin insolvency proceedings against the late payer in order to wind up their business. This right gives you the ability to wind up their business.
Resolving disagreements regarding payments with the assistance of a lawyer
If the client has been ignoring your overdue invoice emails or has been buying time with rationalisations, the threat of legal action is sometimes enough to get the client to finally pay the amount owed.
There is a possibility that a lawyer will be able to write a formal letter to the customer on your behalf and send it on their behalf.
If the amount of money that is being claimed is on the lower end of the spectrum, you might come to the conclusion that it is not worth it to pay for the services of a lawyer.
What are the fees associated with initiating legal action?
The cost of taking legal action is proportional to the amount of the claim that is being pursued. You can file a claim through Money Claim Online for amounts ranging from £300 to £100,000, and the fees will range anywhere from £25 to 4.5 percent of the claim’s value, depending on the value of the claim and the assumption that the matter involves a straightforward and uncontested debt that is owed.
The costs for the small claims track and the fast claims track range from nine pounds to nine hundred pounds, but even if you win, it is possible that you will not be able to recover these costs (especially for the small claims track).
When it comes to certain matters that go beyond that, you will need to determine whether the value of the claim is sufficient to warrant the costs of legal representation involved.
Summary of What To Do When A Customer Is Refusing To Pay For Work Done In The UK
Taking clients to court over a contested invoice should always be a last resort for businesses.
There are steps you can take to make the payment process as straightforward as possible for both you and your clients, which will give you the best chance of getting paid for your work. These steps include the following:
Every job should begin with a contract…
Before you get started on your work, you need to make sure that you have established some rock-solid foundations.
- In an ideal scenario, you will have negotiated a contract that outlines the terms of the agreement, including dates for delivery and payment, deadlines, and proof that the products have been delivered.
- You also have the option of including clauses that allow you to terminate the agreement in the event that payment is not received, as well as clauses that allow you to retain ownership of your products until they are paid for.
- You have completed the work in good faith and are therefore entitled to payment if both parties have entered into a contract and you have delivered what was requested in accordance with the agreement. It makes no difference whether the client has actually used the work or not.
- Even if you do not have a written contract that has been signed by both parties, you will still have agreed upon certain terms, regardless of whether these were communicated verbally or through the exchange of emails.
- The terms of payment may very well have been expressly set out, in which case you can still pursue any money that is owed to you.
- It is possible to lessen the likelihood of not being paid on time by sending out invoices in a timely manner and following up on payments when they are overdue.
- This can also help ensure that legal representation is sought out only as a last resort.