The Pre-Action Protocol for Debt Claims

I am terrible at DIY (I only need to look at a tin of paint for the contents to go splat) and so I have got to know a couple of local traders quite well. Each of them seem to dislike paperwork and say it is difficult to find the time to send out quotes and invoices. As tedious as the paperwork can be, invoicing customers and making sure you get paid is crucial to any business.

https://www.justice.gov.uk/courts/procedure-rules/civil/pdf/protocols/pre-action-protocol-for-debt-claims.pdf, which came into force on 1 October 2017, may well add to the traders’ administrative work load. The protocol applies to any business debt being pursued against an individual (so not business to business debt unless the debtor is a sole trader). When a business wants to pursue an unpaid invoice, the business will need to take a number of steps before court proceedings can be issued.

The aim of the protocol is to ensure that the debtor is provided with sufficient information to respond to the demand for money, and to help the parties to explore whether the dispute can be resolved without the court’s involvement. So, for instance, the protocol allows a debtor 30 days to respond to the demand for payment before court proceedings can be issued. It also provides that any offer by the debtor to repay the debt by instalments must be properly considered.

Sometimes businesses get things wrong and individuals can find themselves being pursued for a debt that is not owed. This can be very frustrating and in such cases the protocol will be a welcome tool in ensuring that a defendant receives proper information about the debt being claimed.

Where a business is striving to be paid for a job well done, the protocol will undoubtedly be an extra administrative burden. That said, embarking on court proceedings is always time consuming, and often expensive, and if the use of the protocol can help avoid the court’s involvement, it should be welcomed.

How to reduce the risk of unpaid invoices

Prevention is better than cure and businesses should routinely review how they engage with their customers to reduce the risk of unpaid debts. The following tips are aimed at sole traders and small businesses, but they are worthy of note for all businesses engaging with customers.

1. Set up a routine for raising invoices and chasing payment and stick to it. Ensure that invoices are sent out as soon as possible after you have completed the work. If you take a while to send out your invoice, don’t be surprised if your customer takes a while to pay it.

2. Manage your customers’ expectations by providing clear time estimates for completing the jobs and also clear information about how much the work will cost and how soon you will expect to get paid. Provide this information in writing wherever possible.

3. Ensure that you get your customers’ details correct before you start the job. Sending an invoice addressed to the wrong person is not going to result in smooth payment. Try to get the customer to confirm their details to you in writing before you start work.

4. Provide as many different methods of payment as possible with your invoice. Ensure that your own details are correctly recorded on your invoice.

5. If you are concerned about a potential customer’s ability to pay, try to negotiate either full or part payment before the job starts.

6. Try to get your customers’ feedback about your work as the job progresses. That way any concerns, or potential grounds for dispute, can be resolved before an invoice is issued.

7. If you do need to pursue a debt, keep a note of all telephone calls, emails and letters requesting payment, and any replies received, as this will support your claim.

8. Though it may not be cost effective to instruct a solicitor to pursue a one off debt, consider instructing a solicitor to review your terms and conditions and your procedures for recovering debt, especially if non payment of your invoices is becoming a regular problem