Outstanding payments can be a major headache for businesses, as they can have a significant and sometimes detrimental effect on cashflow. On top of that, seeking payment can take up valuable time that would be better spent on running the business.
In fact, according to Bacs, the not-for-profit entity that runs the eponymous payment service, late payments cost the UK’s small businesses more than £2 billion each year.
This means that recent changes to the procedures for pursuing a debt, owed by an individual or a sole trader, before taking court action are likely to be of widespread interest.
The new Pre-Action Protocol for Debt Claims came into force on 1 October 2017 and indeed it is a good idea for all business owners to be familiar with the procedures, should an issue arise
It applies to all businesses, including sole traders, who are seeking payment of a debt from an individual, again including sole traders.
It only applies to business-to-business cases where the debtor is a sole trader. It does not apply where other Pre-Action Protocols are in effect, such as in relation to construction claims.
No Pre-Action Protocol previously existed in respect of Debt Claims, but businesses were expected to comply with the Practice Direction for Pre-Action Conduct.
The new Pre-Action Protocol sets out specific steps that businesses need to follow and details the required content of the letters that must be sent to the debtor prior to court action. It also contains an information sheet and reply form that should be sent to the debtor.
The Protocol has been designed with the intention of increasing the number of cases reaching resolution, perhaps by way of an agreed payment plan, or Alternative Dispute Resolution (ADR), before court action becomes necessary.
In business, we are all aware of the saying that ‘Cash is King’; a company may have all the revenue in the world but without good cash flow it can easily run into difficulties. Effective cashflow management is crucial and quite necessary when it comes to the success and even life-span of a business, but we recognise that not all business owners have the confidence to really take control of their companies cashflow.
That’s where we come in – we can work with you to put a realistic plan together that will cultivate confidence within your business, facilitate growth and help you to stay on top of your finances. To find out more about what we can do for you and your business, call us today on 01767 315010.