Grumpy Old Git

As a relatively small business there is a ton of legislation to deal with - Health and Safety, employment law, pressure vessel regulations and a string of acronyms - LOLA, PUWER, PAT, VAT, PAYE, NI, all of which we have to comply with and administer under threat of financial penalties or prison.

Why then has our legal system omitted to create a sensible framework for the recovery of commercial debts?

Late payment, according to the Financial Services Bureau, is costing the UK economy about two billion quid a year and is responsible for sizeable numbers of small business failures.

It is the supplying business that ends up paying high rates of interest on their overdraft, and enduring cash flow problems, simply because some other organisation either decides they will not pay on time or deliberately puts obstacles in the way of payment.

The excuses are legion - cheque's in the post (it never is), we've lost the invoice, the cheque's drawn up but unsigned, the director or supervisor is on holiday, I cannot find the official order, I've signed off for payment now, you need to speak to accounts, etc. etc. These excuses have been around for years and are bad enough, but there is now a new breed of excuse.

Before carrying out the work for a particular customer my company had to be "approved". Environmental and Health and Safety regulations, Equal Opportunities requirements etc., all had to be met to gain approval. We were duly approved at the time the job was done, but found that the approval had been magically revoked when payment was being pursued.

This change in status had nothing to do with the work, it was because the public and employee liability insurance renewal date had fallen after the job was done and after the due date for payment, but before payment had been made.

My argument was that we were fully insured at both the time the work was carried out and beyond the due date for payment, but this fell on deaf ears
The client demanded to see renewed insurance certificates before releasing the cheque.

Now, I don't know about your insurers, but my broker takes a good deal of time to send me the official insurance certificates following renewal and this is, normally, absolutely no problem.

I had sent in copies of an email from my broker confirming the receipt of the £6,500 cheque to pay for that renewal (further damaging my cash flow), but Mr. Jobsworth working for the client was not happy with that. Oh no, he wanted to see the actual insurance company's letters confirming renewal, and the policy itself. Until he saw the renewal he could not release payment for the work carried out under the previous year's insurance. This tactic resulted in a further thirty days of delay before the cheque finally arrived, 120 days after the work was carried out! If all my customers did that I would have over £60,000 permanently tied up in delayed payments, and that could cause a healthy company, with no other debt, to go bust.

Try telling the VAT man or HMRC that you have several customers that have delayed payments, and that you cannot meet the VAT or PAYE or NI payment dates. On second thoughts don't bother, because sympathy is not their strong suit.

So, what do you do?

Send a seven day letter, giving them umpteen more days free credit and, if that doesn't work, take action in the small claims or county court, both of which take some days to serve the documents and allow a further eighteen days for the client to pay before entering a judgement.

Now, that ought to be the end of the matter, and the money ought to be paid, but it is up to the claimant to enforce the judgement. So, there is further expense and delay while the bailiffs do their stuff. At anytime in this process a cheque for the claimed amount can be paid into the court and the whole system is abandoned. Do you then claim again to get your court and bailiff costs back? Of course you don't, you just bank the cheque and thank God that the defaulter has not gone bust.

The longest I have ever been kept waiting for substantial sums of money is eighteen months. Nothing wrong with the job, just a very rich man who seems to have got rich by refusing to pay his bills.

The most annoying time was when a landscaper client brazenly told me that he had decided to spend his money on a flash Mercedes, that he had funded by simply delaying all payments to any of his sub-contractors or suppliers for a full sixty days. He made the decision because he was fed up with waiting for well over £250,000 he was owed by his customers.

Is it me, or does debt recovery actually need some of the parliamentary time and activity that has been devoted to all the other legislation? There has been a lot of hot air talked about debt amelioration, particularly for mortgage defaulters, but no consideration seems to be given to the other side of the coin, the people and businesses who have supplied hard cash, goods and services for which they quite rightly ask for payment.