April 15, 2020

Since Coronavirus people aren’t paying their invoices, can I still demand payment?

Whilst you understand the predicament of your customers, you and your business are no different. Everybody needs the cash to keep coming in. Because of this, we all need to work together and be considerate - because by doing so, future positives can be gained.

Whilst the steps set below are designed to help financially vulnerable people, the fact remains that the debt exists and will still need to be paid.

To pause or to pursue...

If you have been chasing debts (especially those that were due and owing prior to the current situation kicked in with the Government lockdown on the 11 March 2020) you can and should continue to press for payment as you would usually.

However, when doing so, you may wish to consider a slightly different approach.

You may wish to acknowledge the situation we are all in and that things are difficult for all but where the debts have been outstanding for some time, they still need to be paid and ask that they are paid in full within 14 or 30 days from receipt of the letter of demand (depending on whether you are dealing with a business or individual).

You may then wish to extend the arm of reasonableness and offer to have payment discussions with your debtors if payment cannot be made in one lump sum for example. What you need to be seen to be is reasonable and considerate.

Before entering into any payment plans, you need to check your terms and conditions and, if your usual payment terms would be varied with the payment agreement entered into you need to ensure that you clearly identify that this is temporary and relating only to identified debts accrued to that date.

Your agreement reached should also be without prejudice to your contractual and legal rights and subject to a default provision so that if they fail to keep up the payments and/or any compromise made falls away. It should also be documented in writing.

Suspension of the account

If a suspension of the account/time to pay is offered for example with payment to be made in 3 months time (similarly to how the Banks are working) you may wish to consider whether you offer to do so subject to security being given, for example a voluntary charge over property with value in it or a Directors Guarantee in case, in three months, the position is different for them.

For contracts that have been entered into/supplies that have been made and debts accrued since 11 March 2020, my view is that you should consider ways in which you can keep money coming in whilst not placing undue pressure on the customer. As said at the outset, it is all about reasonableness in my view at the moment and working together.

Agreeing to extend or varying your usual payment terms, requesting part payments and instalments or suspending the balance with security could be reasonable ways to continue to trade and maintain good relations with your customers and avoid any detriment whether to your business continuity or brand.

If your customers are truly in a position where they cannot pay, working together is, in my view, more likely than not to keep cash coming in, create additional goodwill, and when the restrictions are lifted aid future business growth.

However, if it is the case that your debtors simply don't want to pay and there is good evidence of this, you can pursue the debts as you would normally.

The Protocols that must be complied with before Court proceedings are issued remain without change. However, the Courts are under pressure and prioritising urgent matters so there may be a short delay to proceedings getting off the starting block as a result of that and; we may see more dilatory defences being lodged. The Court rules are still there and steps can still be taken in that situation. There will, however, be cost implications.

Finally, we do anticipate that the Government may step in on debt recovery especially with regard to consumer debts but currently there are no restrictions imposed. There have been changes implemented to the Insolvency legislation and we are aware that charitable associations are lobbying the Government for change.

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