My company is owed £12k - is taking out a CCJ the way forward?

[SearchingforAnswers]

DH and I are freelancers in the same business, so we set up our own company and we invoice for any work we do via our company which is VAT registered.
DH did some work for a company before Christmas and we still haven't received payment for it. The company who owes us the money tell us it's because they haven't been paid by their client yet.

We've never been in this position before so unsure what to do.
We feel we've been patient enough and think it's time to take some legal action, but have no idea where to start.
Somebody mentioned a CCJ but we might be owed too much for that?

Any advice would be most gratefully received.
TIA

[PollyMorfic]

If your contract is with the client's company, then the fact that your client hasn't been paid by their client is their problem, not yours. Although obviously if the client hasn't got the money, then it can sort of become your problem as well.

If they are having financial difficulties they will pay whoever shouts loudest first - you need to make sure this is you, otherwise you will keep getting shunted to the bottom of the priority list. Though obviously you need to consider whether or not you are likely to be wanting to do business wiht this client again - there are some people I would accept late payment from because I know they are fundamentally reliable, but if it's someone I don't have a regular established relationship with, then IME it's best to go in hard and fast. The nightmare scenario is where the client goes bankrupt while still owing you money, because in that case you can wave goodbye to your cash until 3 years down the line, when you might get a cheque for 1p in the pound. Bad news.

SO. Assuming you want to get paid, fast, here's what you do.

1. You write a formal, stroppy letter stating that you invoiced them for ABC amount on DEF date in respect of XYZ work, ideally referencing the contract that they signed or the terms and conditions they agreed to. The letter says something like: "Further to our invoice of blah blah for £eleventy squillion quid in respect of blahdiblah work carried out between blah blah dates, we note that despite repeated reminders we have still not received payment of the outstanding amount. As you are aware, our payment terms are 30 days from the invoice date, and this amount is now considerably overdue. Consequently we must inform you that if we do not receive payment in full of the outstanding amount within fourteen days of the date of this letter, we will have no option but to take legal action against yourselves in the County Court in order to obtain payment of the amount due. We look forward to hearing from you very shortly."
   

1. You wait fourteen days, and maybe an extra 7 just in case. Most people pay up at that point. But if they don't, you then make a county court claim online (a bit fiddly the first time you use it, but much easier than faffing around with paper forms), and they will do the rest for you.
   

1. Pray/cross fingers/light candles/sacrifice chickens/chant that your client hasn't gone bankrupt before you get paid.

[SearchingforAnswers]

Thank you very much for this, PollyMorfic. That's exactly the kind of advice I was looking for.
Couple of further Qs though:

1. I know this sounds terrible, but we have NEVER chased the invoices because the MD kept sending us emails reassuring us we would be paid when their clients had paid them - does it matter that we have never chased our invoices until now?
   
2. Also, our invoices don't state payment terms of 30 days, doesn't state payment terms at all - does that matter? (I know we sound a bit amateurish, but just never thought this would happen.)
   

Thanks a million for your reply, and for the link.

[Lizcat]

Today change your invoices to state your payment terms.
People will say anything they think you want to hear to stop you chasing them for the money. You are about to cross the 4 month point and really you have to get a little heavier. As previously said it is often those who shout the loudest who get paid.
We all encounter this at some point.

[PollyMorfic]

Yy, you need to change your system to state payment terms on the invoice. It doesn't have to be 30 days, it depends on what's standard for your industry. I deal with a lot of public-sector organisations that only do a payment run once a month, so there would be no point in me having shorter payment terms because their systems just don't work that way. But in lots of industries payment on completion is normal, or 7 days or whatever. It's good to state terms on the invoice cos that way everybody knows what they're dealing wtih, even better if you have a quote, contract or letter of instruction in which the client specifically agrees to those terms. But not having that doesn't mean you can't chase payment - a verbal contract is still a contract, and if you have an email trail of promises to pay that shows they do inprinciple accept that they are liable for the invoice. So if it goes to the wire and you do have to take them to Court you can adduce that as evidence that they accept they need to pay.

If you haven't specifically chased it, then just tweak the letter to say "...despite your repeated reassurances" rather than the bit about reminders. But it is good discipline to have a standard letter that you send as as soon as payment goes past the due date . You do need to make clear to people that their cashflow is not your problem - your contract is with them, so you can still expect to be paid within your usual payment terms regardless of their timescale for being paid by their own clients. I do sometimes make exceptions to this for people that I know well and do regular work with, but it's a good rule of thumb.

There is also the provision within the county court claim process to claim for interest on money outstanding. I don't do this because I am paid from ringfenced budgets via the Legal Aid system, and it would end up being more trouble than it's worth to extract the extra for interest. But depending on the sector and type of business you're dealing with, you could threaten to add interest if they don't pay up sharpish. Your fee for bringing the claim will automatically be added to the amount they need to pay, so it really is in their interest not to hang onto it. I think some businesses just like to keep the cash on their own books until the very last minute, because it makes their cashflow look better. These people can smell fear and indecision, so you do need to sound as if you mean it when you start making 'give me my money NOW' noises.

IME 9 times out of 10 people pay up when they get the 'pay me in 14 days or I'll take you to Court' letter. Send it by recorded delivery to show you mean business.

[SearchingforAnswers]

Thank you, thank you, thank your advice.
I was beginning to feel a bit down about it all yesterday, but reading your replies gives me a clear plan of action and is helping look at the situation in a far more business-like manner, as opposed to reacting to it emotionally.

Thank you, once again.
I heart mumsnet!!

[minipie]

Another alternative (rather than a court claim) is a statutory demand.

see herewww.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/CourtClaimsAndBankruptcy/DG_187711

These cost you nothing (unlike making a court claim). You do have to make sure you use the correct method to serve it, see this page www.businesslink.gov.uk/bdotg/action/detail?itemId=1084608756&type=RESOURCES about how to serve it.

If they don't pay or deny the liability (with good grounds) within 21 days of the stat demand, you can then go to court and make them insolvent.

That is usually pretty good motivation for someone to pay you within 21 days.