Ensuring that you get paid in business requires a combination of good practices, clear communication, and legal safeguards. Here are some of the best ways to ensure you get paid:
1. Clear Contracts and Agreements
– Written Terms: Always have a clear, written agreement outlining payment terms before starting any work. Specify payment amounts, due dates, and any other payment-related terms.
– Payment Schedules: Set out when payments are due. For instance, will it be 30 days from the invoice date, upon completion, or in stages?
– Late Payment Penalties: Include clauses that specify penalties or interest on late payments. For example, you can charge a late fee of 8% above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998.
2. Clear Invoices
– Professional Invoicing: Always issue professional invoices that clearly state the full name of the party owing the money, the amount owed, payment due date, and bank account details.
– Invoice Reminders: Send polite but firm reminders as the payment date approaches and again after the due date passes.
3. Deposit or Upfront Payment
– Deposit for New Clients: For new clients, it’s common to request an upfront payment or a deposit, especially for larger projects or ongoing services. A typical deposit might be 30-50%.
– Stage Payments: For long-term or high-value projects, request payments in stages (e.g., 50% upfront, 50% upon completion).
4. Offer Multiple Payment Methods
– Make it easy for your clients to pay by offering multiple payment options such as bank transfers, credit/debit cards, PayPal, or even online payment portals like Stripe.
5. Credit Checks for New Clients
– For businesses offering goods or services on credit, it’s smart to perform a credit check on new clients before agreeing to terms. This helps identify potential risks of non-payment.
– Use Credit Reporting Services: There are services such as Experian, Equifax, or Creditsafe that can help assess the financial health of potential clients. TM Law can do this for you .
6. Chase Late Payments Promptly
– Follow-Up on Due Payments: The moment a payment is late, follow up promptly. Send polite reminders via email or even phone calls to ensure they don’t forget or delay further.
– Formal Letter: If reminders are not effective, get TM Law to send a formal “Letter Before Action” (LBA) to warn them that you may take legal action if the payment isn’t received. In this letter we will demand interest and compensation which will cover the cost of the letter of claim.
7. Use reliable solicitors to recover the money owed.
– If your client continues to delay payment despite multiple reminders, you should contact us at TM Law as we have inexpensive assistance to help recover debts and the costs are usually covered by the interest and compensation to which you are entitled under the Late Payment of Commercial Debts(Interest) Act 1998. Contact us at TM LAW for details of what you can claim.
– Alternative Dispute Resolution (ADR): For smaller amounts, mediation or arbitration can help resolve payment disputes without going to court.
8. Legal Action
– Whatever the amount of the debt, you can take the client to court. The process is relatively simple and inexpensive but if needed we can do that for you at TM Law Limited at little cost and make sure it is done correctly and that everything you are entitled to is claimed.
– Insolvency Proceedings: If a client is in financial trouble and fails to pay, you may consider petitioning for them to go into administration or liquidation (if you’re owed a significant amount).We at TM Law can serve both a statutory demand and issue insolvency proceedings if required.
9. Retain Ownership of Goods Until Paid (Retention of Title Clauses)
– Include a Retention of Title (RoT)clause in your contract. This means you still own the goods provided until payment is made in full. If the client doesn’t pay, you can legally reclaim the goods but this is dependent on being able to identify the goods and that they have not been put into the fabric of a building for example-we at TM Law can both draft these clauses in your terms of business and also advise you as to whether you can go and take the goods back.
10. Personal Guarantees
If you are unsure about a commercial clients ability to pay then ask the director(s) to personally guarantee the payment to you if the company is unable to do so. If they refuse you must ask how much confidence they have in the company if they will not guarantee the money. At TM Law we can produce a personal guarantee for you for little cost.
11. Set Credit Limits
– If you deal with repeat clients, set a credit limit to avoid overexposure. Review their payment history regularly and, if needed, adjust credit terms or reduce the limit for clients who have a history of delayed payments.
By combining these practices, you’ll significantly reduce the chances of not getting paid for your goods or services. Always remember that the key to ensuring timely payments is clarity and consistency in your business dealings.
The post How to make sure you get paid in business appeared first on TM Law Solicitors.
