Getting paid on time – it’s kind of essential if you want your business to survive and prosper. So you’ve got the basics down – agreed terms; timely billing; monthly statements of account; a regular review of aged debtors to identify anything that’s overdue; established credit limits. Maybe you’ve even organised things so you get paid in advance, and you collect by Direct Debit. Well done you! But what happens when things go wrong?
Before getting to the litigation stage – hopfully long before – you’ll have had the difficult conversation with your customer. Why haven’t they paid? Is it a simple oversight? Are they facing some difficult, unexpected circumstance? Is there some aspect of your product or service they are unhappy with? With tact and good communication, it may be that the problem can be put right and the relationship maintained, or even strengthened, with both parties benefiting in the long run.
Assuming that the problem cannot be resolved through simple discussion, mediation may be another option. A trained mediator, an impartial person who is not involved with the transaction, might be able to help both parties reach some agreement. Mediation, or Alternative Dispute Resolution as it’s sometimes called, usually comes at a cost, but it may be cheaper than engaging solicitors or the courts. For more details and resources on mediation check out www.mygov.scot/alternatives-to-court/.
Once these options have been exhausted, in practical terms legal action may be the only choice left. You can make a court claim and, if successful, the court can order the money to be paid. In Scotland, there are two ways to do this. If you are owed less than £5,000 and the case isn’t complicated, you can use the “simple procedure”. This is a relatively quick, inexpensive and informal way to resolve disputes. The claim is made in a sheriff court by paying a fee to the court and submitting a claim form. You may also need to attend the court in person in some circumstances.
If you are owed more than £5,000 or your case is more complicated, there is an “ordinary cause” procedure which must be followed instead. In these circumstances it is definitely advisable to appoint a solicitor to help you.
Probably the last resort of all, having exhausted the above options, is to make a statutory demand for payment. If this is ignored, you may apply to a court to make the debtor bankrupt (if you are owed £5,000 or more by an individual, including a sole trader or member of a partnership); or, if you are owed money by a company, get the company wound up (if you and any other creditors are owed £750 or more). The costs of this step are likely to be high and you may not get your money back.
Readers should of course take appropriate legal advice before commencing any form of court proceedings.