It’s a common problem organisations face. You’ve provided the agreed goods or services and your customer hasn’t paid for them. You’ve probably chased and been promised payment, but nothing has materialised. So what can you do?
- Find out why they’re not paying
Is the debt disputed? Are they waiting for a payment from a supplier?
If you can find out the reason for non-payment, it might help you agree when and how a payment will be made and to assess whether there is an underlying issue.
2. Check your contract
What are the contractual terms around payment? You may be entitled to terminate the agreement and/or stop providing goods and services until payment is made.
This might also give you scope for negotiating payment with the customer. However, before terminating or ceasing to comply with your obligations, check the contract carefully and take advice rather than risk being in breach of contract yourself.
3. Try to agree payment or a payment plan
Using the information you have gathered through the above steps, try to negotiate a payment with your customer (assuming you can get hold of them).
The approach you take will depend on your relationship with your customer and whether that relationship is ongoing. You should take care to document any agreed terms and take advice if necessary.
4. Issue a letter of claim and then proceedings
If you’ve tried all this and they still haven’t paid, a letter of claim could help. You should take advice from a debt recovery specialist or law firm, as with all the following steps, but this is not necessarily expensive and can be a real turning point.
A letter of claim is essentially a demand for payment that complies with the court rules that parties must follow before issuing proceedings.
Sometimes, this letter is enough to prompt payment. If not, you can issue a claim. Once a claim has been served, your customer will need to either admit or defend the claim and, if they fail to do so, you can get a court judgment against them.
5. Issue a statutory demand
People commonly think this is the solution to recovering a debt, but statutory demands should be used with caution.
This is a formal demand for payment which, if unsatisfied within 21 days, would give you the entitlement to apply to court for the winding up of your customer’s company.
Statutory demands can only be used where the debt is undisputed by your customer. They could also potentially apply to court for an injunction to prevent their winding up, which may be costly.
It is therefore sensible to take advice before serving a statutory demand on a customer.
6. Winding up petition
If your customer does not satisfy the debt once the statutory demand or shorter period for payment has expired, you could petition for the company to be wound up.
This is an extreme option and cannot be used simply to enforce a debt. Ultimately, if a company is wound up, its assets will be divided amongst its creditors and the creditors will recover only part of the debt.
It is therefore sensible to take legal advice before choosing this approach, as it can have costly consequences if deployed inappropriately.
The appropriate course of action will depend on the circumstances – the ability of your customer to repay, the contractual terms, the relationship between the parties.
If you have any queries on what this means for your club, please call our dedicated England Athletics Helpline on 0845 050 8458 or email [email protected]