What to do in Britain when clients don’t pay

Sun, 10/16/2016 - 21:27 Erika Baker

It comes up time and time again – clients pay late or don’t pay at all. It usually happens with new clients but can also happen with long-standing good clients.

While good working relationships are paramount and small businesses should do what they can to retain clients, getting paid – and getting paid on time! – is important for small companies and freelancers alike.

So what to do when a client doesn’t pay?

  1. Friendly email conversations

Don’t go in heavy-handed right at the start, but try to talk to the client and find out why they are not paying. “We can’t pay you until our client pays us first” is not a legally valid excuse! Point out that your contract is with your client, not with their customer, and that you expect to be paid regardless of when their customer pays them.

Be reasonable but firm and make sure that the client knows right from the start that you will not let this rest.  

If you pick up the phone, make sure you follow up with an email summary of your conversation – you may need to have a trail of evidence of what you have tried to do to get paid.

  1. Formal reminders

If a conciliatory approach does not bring results within a week or two, send the client a first formal reminder. State the invoice number, the outstanding amount, the due date, mention that you have tried for a few weeks to get your payment, give the client a deadline to pay or to send you proof of payment. And state clearly that you will send a second formal reminder if the deadline is missed, and that you will start formal recovery proceedings at the end of the formal reminder process. Depending on your plan, state that you will involve a solicitor, file a small claim with the County Court, or, if your client is a Ltd company and owes you a considerable sum, make a statutory demand.

Follow this up with a second formal reminder and then a third, each time repeating the same content as in your first email.

Chances are your client will pay quickly!

  1. Serious threat of legal action

If you still have not received payment after the third formal reminder, you can try one more step before you finally resort to legal action.
Research the process of filing a small claim/statutory demand, fill in the forms and then send them to the client, telling them that you will send them to the Court if you have not received proof of payment within 24 hours. Your client now knows that you are serious and could well pay up before incurring additional legal costs.

  1. The various legal options

You can find more information about the various options open to you here:
Filing a small claim https://www.gov.uk/make-court-claim-for-money/overview

Making a statutory demand https://www.gov.uk/statutory-demands

  1. Keeping the client

And after all of that, provided you’ve been polite and professional throughout, you can even write to the client, tell them that you have enjoyed working with them, if not the hassle of getting paid, and that you would be delighted to work with them again in the future – for pre-payment! It’s surprising how many companies will take you up on that!