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What can be done if a customer won’t pay my invoice?

Posted on: Thursday 6th February, 2020

What can be done if a customer won’t pay my invoice?

If a customer won’t pay your invoice and you’ve already exhausted the usual methods of collecting payment, you may be wondering how you’re going to recoup the debt. There are several steps you can take in these circumstances.

Debt collectors

Hiring a debt collector or a debt collection agency sends a clear message to your customer that you’re not going to let them simply not pay. Some smaller companies in the debt collection industry only collect certain types of debt, and this is often true of local companies.

Other larger organisations, however, operate on a nationwide basis - either way, there are typically two methods to charge fees as a debt collection agency:

  • As a percentage of the debt collected
  • Selling, or assigning, the debt to the agency for a reduced amount - they receive their fee by collecting the full amount from the customer
CFS Redundancy Payments are a very professional company, Caroline who is dealing with our case is friendly, compassionate and very clear in explaining everything during this difficult time. The service we have received has been amazing, Thank you.
Tina Hill
Tina Hill

Solicitor’s letter

A solicitor’s letter may persuade your customer to pay the debt for fear of court action. This is called a ‘letter before action’ and threatens your customer that legal action to recover the debt will follow if it remains unpaid.

County Court Judgment (CCJ)

If you take legal action and the court rules in your favour, your customer will be issued with a County Court Judgment, or CCJ. If they fail to pay the CCJ, you’re entitled to take further action to recover your money.

You can apply for a Warrant of Control from the court, whereby county court bailiffs visit your customer to recover the debt under the Taking Control of Goods Regulations. They can seize certain goods owned by your customer for sale at auction, and the proceeds are used to repay the debt. 

21-day statutory demand

If your customer is a limited company and the debt is not disputed you can send a 21-day statutory demand for payment if it exceeds £750, or £5,000 if the customer is an individual.  A statutory demand is a formal demand for payment, and often precedes winding-up or bankruptcy action by a creditor.

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Several enforcement measures are also available if you remain unable to collect your debt. These include:

Winding up or bankruptcy petition

Winding up a limited company, or making a person bankrupt, is generally seen as a measure of last resort, and usually follows an unpaid statutory demand.

Earnings attachment

An attachment of earnings order granted by the court results in money being deducted on a weekly or monthly basis from your debtor’s earnings. Their employer deducts a sum decided upon by the court, for a pre-arranged length of time in repayment of your debt.

Charging order

Charging orders are used in relation to a debtor’s assets, so if your customer is a homeowner, for example, a charge is placed on their property so any proceeds from a sale must initially be used to repay your debt.

Third party debt order

This type of enforcement action involves freezing your customer’s bank account to repay your debt. To prevent them withdrawing the balance of their account beforehand, the debtor doesn’t receive prior notification of this action.

Failing to collect debts on time places a strain on business cash flow, and compromises the ability to trade. If you would like more information on the most effective ways to collect business debts, call one of the team at CFS Redundancy Payments.

We can provide reliable independent advice on how to proceed if you’re faced with late or non-payment by a customer, and will ensure you understand your rights when collecting business debts.

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