Stressed over unpaid invoice - should I go to small claims?

[stressedout85]

I’m freelance and really in need of some advice.

Last year I completed a small job for a client for the agreed sum of £300. I invoiced them and after 40 days (my payment terms are 30 days) I chased the payment as nothing had come into my account. They emailed back apologising and said they’d pay soon, but nothing materialised.

Anyway, several emails later I’ve still received nothing and the invoice is now about 70 days overdue.

Earlier this week I sent another email stating that if I don’t receive payment by the end of the week, I will add a £40 admin fee plus backdated interest - as per the government guidelines - to the invoice.

I’d hoped this would induce a response but it’s now Thursday and I’ve still heard nothing. Obviously there’s a chance they could still pay up as I did say end of the week, but I’m getting the feeling that they won’t.

Once I’ve reissued the invoice with the admin fee plus interest, what are my next steps? How long do I give them to pay the new invoice before going to small claims and if I do go to court, can it be done online or will I need to appear in person? If they still fail to pay after the court rules against them, what happens next?

I’m really stressed out about this as money is tight at the moment and I have a baby on the way so don’t want to let this slide.

The person owing is a sole trader, not a company, in case that’s relevant.

Any advice would be much appreciated.

@Doyoumind I've also dealt with companies with 60 day standard payment terms, but in this case it's a one-man band so not an issue.

We run a small business and find a phone call from someone they've never dealt with phoning from our company often prompts payment

You don't have to use mediation, you have to offer it (and the other party pays half). In my experience most companies ignore the offer of Alternative Dispute Resolution.

You need to send a letter before claim. Get a decent decent up to date template from the web, fill in all the details including your evidence of claim (copies of emails from them asking you to do the work etc. You don't have to re-issue the invoice. You add the amount of interest/late payment etc onto the letter before claim.

It usually scares people into action. If that fails print off the Small Claims form from Moneyclaim online, fill it in by habd and send it to them with a note saying that it will be submitted (there is a small fee for doing so which they pay if they lose) if payment is not received within 7 days.

You cannot add an admin fee or interest unless it's in your terms of business (which you've communicated to them).

Just send a letter before action and then issue in the county court -you'll be allocated the small claims track. Although you don't get any legal fees in your favour, you will get back the court fee, travel costs and any other out of pocket expenses that are reasonable.

The other party can only ask to have the claim heard locally if they are a private individual, not a business. Most claims of this kind would not go to court.

You cannot add an admin fee or interest unless it's in your terms of business (which you've communicated to them).

That's only true if the client is a private individual. If he is a business, including a sole trader then the Late Payment of Commercial Debts (1998) applies.

You cannot add an admin fee or interest unless it's in your terms of business (which you've communicated to them).

I don't think that's right - from what I've read it looks like you can charge an admin fee and interest on a late payment whether it's in your terms or not.

@Comefromaway thanks - they're a sole trader.

You beat me to it, @Comefromaway

I've used Thomas Higgins before. Really easy to do, you just upload some details and they send a letter for you. Think it was maybe £15. That normally gets a reaction!

Or you can threaten it first too.

It's awful not being paid, creates so much anxiety.

Interest rate is 8% above Bank of England rate

Plus there is a fixed fee you can charge under the legislation

Thanks @ChipsAreLife. What does the letter from Thomas Higgins do exactly - threaten court action?

Yes essentially. It says the next stage will be court which normally scares them!

www.thomashiggins.com/letter-before-action-or-late-payment-demand.html

I did a small claims submission for the same thing. It was really easy. The client paid up before it went to court. The process adds all the fees / interest/ compensation to the claim and they had to pay or all. It was very satisfying!

You just have to make sure you follow the specific protocol for small traders. There are basically a few extra things you have to include in the letter, thats all.

www.lovetts.co.uk/pre-action-protocol-for-debt-claims-summary

@ProfessorSlocombe that’s what the debt collector I used for my unpaid invoice (similar amount) advises- why is that wrong? Genuinely interested as it dragged out receiving payment as I ended up accepting a payment plan

EXAMPLE LETTER

Mr / Mrs Example
4 Example Road
London
Post Code
DATE

Dear Sir/Madam

LETTER OF CLAIM

Outstanding account: £AMOUNT

We write with regard to your outstanding account in the sum of £AMOUNT. We have previously provided you with copies
of all of the relevant documents including the outstanding invoices. [However, for your ease of reference we enclose the
following copy documents:

1. Outstanding invoice(s);
2. Statement of Account; and
3. Copy Contract.]

Unless we receive a response from you or receive payment in full on or before [DATE + 30 days] Court proceedings may be
taken against you without further notice.

This letter of claim is sent pursuant to the Pre-action Protocol for Debt Claims which can be found at:
www.justice.gov.uk/courts/procedure-rules/civil/pdf/protocols/pre-action-protocol-for-debt-claims.pdf

We enclose with this letter an information sheet pursuant to the Pre-action Protocol, together with a Reply Form and
Financial Statement. You should read the information sheet thoroughly and complete the Reply Form and Financial
Statement accordingly and return this to us before deadline stated above.

The Reply Form, Financial Statement and any requests for further copies of documents and cheque payments should all be
sent to [NAME] [COMPANY NAME] [ADDRESS]. Contact can also be made by email at [EMAIL ADDRESS] or by telephone
on [TELEPHONE NUMBER].

If it becomes necessary to issue proceedings to recover the outstanding sums we will seek to recover our legal costs,
together with interest pursuant to [the contractual rate of X%] OR [the statutory rate of X% pursuant to] [s69 of the County
Courts Act 1989] OR [Late Payment of Commercial Debts (Interest) Act 1998 and reasonable legal costs and
compensation].

If a Judgment is subsequently registered against you it is likely to affect your credit rating.

Yours faithfully

NAME OF COMPANY

Thanks @stressedout85 and @Comefromaway - I'm happy to stand corrected.

I agree. Letter then small claims court.

I used the small claims process, https://www.gov.uk/make-money-claim

It was very straightforward and you get to set the rate of interest you want to charge.

I filled it out, then saved it rather than submitted it. Wrote a final letter to the supplier (special delivery ) saying they had 24hrs to pay before I submitted it. They had been in touch in email with sob story after sob story but in the face of this, they paid up

Only wish I had done it sooner.

If it doesn't work, you can always pay someone ue use debt collection agency.

Small claims you are encouraged to try mediation but don't have to with a clear cut claim like yours.

Good luck

Thanks all. I’ve checked and unfortunately don’t have their address - just email and phone number! Is it possible to send the letter via email rather than to an actual physical address?

I'm having this issue too with 3 clients. I have issued one to the small claims as it is now 105 days overdue.
Before I start the legal process through the courts I always send an email with this.
WITHOUT PREJUDICE. I explain when I will be starting court proceedings, explain the costs involved for them.
So far in 10 years Ive only lost one invoice due to a non payment , and the guy had a very violent past ( was in the news) . So I weighed up the loss against fear of violence.
Have you tried phoning them . I find speaking to them often results in payment, as they feel so guilty, where emails can be ignored . Good luck, it's a massive issue with being self employed

Also I’m concerned about using a debt collection agency in case they use any underhand tactics - how do you know they’re reputable?

Op why are you worried about collecting your invoice ?
Your customer certainly isn’t worried about not paying you money he owes and consequently would have used to pay your rent/mortgage/bills or buy food.
I mean this nicely but you need to toughen up or stop working for yourself and get a job with an employer and then you won’t need to worry about how they collect their bills.
Are you happy to let this guy get away with not paying you? If not you need to get on with the collection process and not worry about the process or the tactics debt collectors may or may not use.