Can you afford to give Tom, Dick & Harry an extra 30 days credit?
New legislation, known as ‘Pre Action Protocol for Debt Claims’ came into effect this month. The Protocol describes the conduct a court will normally expect, prior to the start of legal proceedings.
The new protocol is clearly slanted towards the Court’s drive to ‘treat the customer fairly’ but there is a case to state that this legislation may have pushed the incentive too far. Therefore now is the time to consider your dealings with individuals and sole traders to ensure you have been diligent and are prepared to avoid extending the process of debt claims.
So what do you need to consider…?
First of all its worth noting that there has been significant changes to the ways in which you can pursue both individuals and sole traders through the Courts. Below you can find the main criteria changes and something’s for you to consider and act on:
- You must be able to prove who you’ve dealt with. You must have information to show whether you’ve dealt with an individual or a limited company.
- So make sure you have standard account opening form, its key.
- You must hold a record of sales agreements. If they’re verbal, then keep a date of the discussion. If they’re written purchase orders, keep copies.
- You need to be able to demonstrate when the agreement to supply was made.
- Prior to issuing legal proceedings, the debtor must have been served with a postal demand for payment giving them a MINIMUM of 30 days to pay.
- This demand can come from the client or a third party agent.
- The demand must include a disclaimer to the debtor, should they not be able to pay then they must respond to the sender and it must also include in depth information.
- So supply a response pack that acts as a aid to prompt the level of detail required in the reply.
- Should the debtor respond and/or dispute your letter of claim, then a further 30 days grace on issuing must be provided to the debtor. Only after this second notice has expired can you issue proceedings.
Therefore if you find yourself dealing with a professional debtor, they could drag out the period before they can be sued, to beyond 60 days by the time you instruct a third party such as ourselves! This doesn’t take into account the time you pursued the debt yourselves.
The message is clear…
Do you now consider putting all of your sole trader and individual accounts on a cash only or pro forma basis ? If not, do you make a practice of passing these accounts sooner rather than later and avoid giving Tom, Dick and Harry more credit than they are worth ?
Further help on steps you can take to create a successful Credit Control process can be found in previous blogs
If you would lke to discuss how we can help with your Credit Control to minimise the need for Debt Recovery or if you need us to help in the recovery of bad debt please get in touch:
Tel 01535 654594