Most business owners know how time consuming chasing outstanding invoices can be. After a few chasing letters you might then instruct a solicitor to issue a claim, or you may issue a claim yourselves in the County Court.
From 1st October 2017 you now have to follow a “Pre-action Protocol”. This is a list of steps the Court says you must carry out before issuing a claim in the Courts.
This ‘Protocol’ only applies when you are chasing an individual or sole trader. If you are owed money by another business (assuming they are not a sole trader) you can continue to use your normal procedures.
The Protocol is intended to encourage early engagement and communication with the intention of resolving the issue without the need for Court intervention.
Under the Protocol you must now give the debtor 30 days, previously 14 days, to respond to your Letter of Claim using a “Reply Form” in a prescribed format. See Here for the Government Guide.
If the debtor does not respond within 30 days then a claim can be issued.
If the debtor does respond, then you must comply for any request for documents (eg, copy invoices, or calculations to show how the invoice total was reached) and wait a further 30 days before issuing a claim.
Review your procedures.
Given the changes which came into effect on the 1st October 2017 it is important that you review your debt collection procedures. A simple strategy to maintain your cash flow would be to trigger the debt collection process earlier.
“Many problems with customers can be resolved with well-crafted terms and conditions, please contact us if you would like to arrange a review or an update to your business terms and conditions.”
Doug Frame – Litigation Solicitor
If you have any questions about the issues raised in this article please contact Doug Frame.