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Simple steps in vetting customers prior to commencing a business relationship can quite literally pay off, but we will have a look at the steps available if an invoice remains unpaid.
By Stewart Croft, assistant solicitor, QualitySolicitors AcklamBond.
The appropriate action to pursue an unpaid invoice is dependent on factors including: the amount of the debt, the status of the debtor and whether the debt could be challenged.
A ‘letter before action’ giving the defendant a period of time to pay is customary. It should be made clear that if the debtor does not pay, legal action will ensue which will ultimately increase the debt with interest and costs.
If the debt remains unpaid there are two options moving forward.
If the debt is over £750 insolvency proceedings can be initiated against the debtor. Firstly, a demand for payment is sent and failure to pay can result a company being wound up.
The threat of insolvency may be enough to make a debtor pay up. One point worth considering is whether the company has other creditors that would take priority over the unpaid invoice debt.
Alternatively, if the debtor has potential grounds to dispute the debt, then a claim can be issued in the county court. If the debtor does not respond a judgment can be obtained relatively quickly.
There are legal fees and court fees associated with both potential actions, therefore careful consideration of each option is necessary prior to choosing the appropriate route.
Businesses should also be mindful of the new debt pre-action protocol which comes into force in October 2017, impacting procedure when business debt are owed by individuals.
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