What Your Business Needs to Know About Chasing Debt & Getting Paid

As a business owner, you do your best to remain on top of your paperwork, maintain good customer relations, and pay your bills on time. But when a customer proves evasive about making a payment or disputes the charges outright, all three of your goals can be disrupted and you can spend far too much time chasing down an unpaid invoice. Though it may be easy to get frustrated (this is your livelihood after all!) there are several legal mechanisms in place that can help you protect yourself and your business.

Determine the problem

First, try and find out why the client has an issue. Usually, it will be related to: the quality of the goods or services provided, the amount that appears on the invoice, or the cost expectations of the customer. Once you are able to clarify why the customer is upset, you will be able to determine whether you agree or not with their claim. Keep detailed records of your conversations in case you are forced to escalate the disagreement.

Don’t get mad!

Dealing with someone who is refusing to pay or takes issue with your product/service can often feel highly personal. Your best chance to resolve this peacefully is to remain professional, calm, and considerate, even if they are being rude or unreasonable. This will ensure that you do your best to avoid escalation and will reflect well on you if and when you are forced to escalate.

Check the record

Invoices are contracts so any disagreement over an invoice counts as a contractual dispute. Review the writing and make sure that you have fulfilled your duties under the defined agreement and if you haven’t, take steps to rectify the situation. Again, keep detailed records so that you are able to demonstrate that you fulfilled your obligations under the contract.

Negotiate

Once you have determined the issue and ensured that you have met your contractual obligations, you should attempt to negotiate with the customer. Try and determine if there is anything that you can do, within reason, to make the customer happy. Though offering a discount or spending more money on a re-order may feel like a loss in the short term, turning a dissatisfied customer into a satisfied customer may yield larger dividends down the road because they may return or share their positive experience with others.

Alternative Dispute Resolution

Sometimes, a situation is so contentious that you need a referee just to keep things moving. Both mediation and arbitration are options for using a third party to facilitate conversations which help reach a resolution.

Take preventative action before doing business

Any diligent business can likely avoid some of the issues outlined above if its transactions are covered by well-considered terms of trade. In essence, this means legally enforceable terms and conditions, most likely in the form of a contract, which clearly sets out the rights and responsibilities of each party to the transaction on issues such as payment, disputation, unavoidable delays, time limits, costings, warranty periods, etc.

Many businesses also provide goods and services on credit terms, which entails them taking some other important precautions to ensure they’re eventually paid. Business owners should take the time to assess the credit risk of those they’re doing business with by sourcing current, verified information on the client’s financial position and – if the risk is assessed as too high – provide goods and/or services only on COD terms.

If credit terms are agreed to, business owners should protect themselves through security arrangements governing the transaction, such as directors’ or bank guarantees on behalf of the customer. Additionally, under the Personal Property Securities Act 2009, retention of title (ROT) suppliers and lessors will become secured parties with a security interest in the collateral by registering the interest on the Personal Property Securities Register (PPSR) – essentially this means the purchaser has possession of the property but can’t claim ownership from the vendor until the full purchase price is paid.

Legal action

Your last resort will be to take legal action against the customer. Beware that this course can be expensive and time-consuming. Depending upon the nature and size of the debt, you will need to pursue the claim through a tribunal or lower court (for smaller amounts) or go to court with legal representation. The larger the debt, the higher the court and the more likely it is that legal representation will be necessary.

If you are embroiled in a fruitless argument with a customer, or find yourself making too many phone calls trying to chase down an unpaid invoice, contact a lawyer today to see how to best handle the situation. Hopefully, you’ll be able to resolve the conflict amicably and retain the client, but if not, legal representation will provide you with the best path forward.