Customers failing to pay an invoice on time will have been experienced by many coach operators. While frustrating, various strategies can help to mitigate such practices in the first place or recover monies due where the client will not play ball or is stonewalling communication, legal specialist Backhouse Jones advises.
Head of Commercial Litigation Libby Pritchard, assisted by Solicitor Kai Leyland, note that the supplier is “commonly instructed to recover unpaid invoices on behalf of coach operators.”
Such a position indicates that difficult payers are not unusual among industry clients, she believes. While preventing that entirely is impossible, a major part of minimising it centres on an operator’s terms and conditions of business.
Those are critically important as far as payments are concerned. “When properly incorporated, they form the legal basis of the entire agreement between the operator and its client,” Libby continues. If they are well drafted and agreed with the customer, and include clear terms of payment, uncertainty and the level of future disputes can be reduced.
Terms must clearly set out when payment is due. They should also provide a defined point at which it becomes overdue and confirm when the creditor can begin claiming interest and compensation, if applicable, on the outstanding sum.
“Unfortunately, unless the operator has agreed to receive payment in advance of providing the service, it will likely always encounter non-paying clients,” she observes. “However, having clear and enforceable payment terms strengthens your position when attempting to recover the debt.”
Terms and conditions need thought
A requirement for clear terms and conditions to exist around payment is simple. Defining those specifics is the trickier part and will depend on the operator’s commercial needs.
Mandating payment up-front removes worries about chasing reimbursement later, but that needs to be set against the reality that such an approach may serve to dissuade some customers from booking.
Likewise, offering too long to settle can invite some parties to pay late or not at all. An operator “may wish to strike a balance or possibly vary payment terms on the nature of the client or the type of service,” Libby suggests. “However, whatever terms are agreed should be clear and set out in writing before the service is provided.”
Certain invoicing practices should be avoided, such as introduction of hidden charges. An operator also cannot exclude liabilities such as compensation for injuries caused by negligence.
Advice on the finery of a business’s approach in those areas is best taken individually where a specialist such as Backhouse Jones can see the specific terms proposed by an operator.
Solicitor’s letter focuses minds on unpaid debt
Getting as close to watertight as possible on payment terms and conditions is one thing, but if money is not forthcoming within the agreed time, things enter a different field. Tempting as it might be in some instances to use social media to shame non-payers into settling, Libby and Kai advise keeping a cool head and following a defined course of action.
The first part of that is promptly following up with the client to serve a reminder that payment is due. If required, the next stage is to send a formal Letter Before Action (LBA) or Debt Recovery Letter (DRL).
“When instructed, we would issue a letter on behalf of the operator setting out the details of the debt and warning that legal proceedings may follow if the amount, plus interest and compensation, is not paid within 14 days,” Libby outlines.
“In our experience, receiving a formal letter from legal advisors often prompts the debtor to take the matter more seriously and can lead to a quicker resolution without the need for court action.”
If all else fails, legal action may be needed
Should that solicitor’s letter still not gee up the client, starting legal action via the courts can be considered. However, that requires assessment of the debtor’s solvency, the likelihood that the money will be recovered, and the proportionality of the costs involved in pursuing the claim.
If the legal route becomes necessary to recover monies owned, various protocols are in place to govern how matters progress. When issuing an LBA or DRL, the debtor must be given reasonable time to respond before court proceedings are opened.
“If the debt is less than £10,000, the claim would fall within the small claims track, which is for low value and noncomplex claims,” Libby explains. “Legal costs in the small claims [track] are not recoverable, save for the court fee and a fixed amount.”
Where the debt is between ÂŁ10,000 and ÂŁ100,000, fixed costs are recoverable. If the debt is undisputed, an operator also has the option to serve a winding-up petition as a prerequisite for insolvency proceedings, although legal advice should be taken whether that is appropriate.
While recovering money owned to a small and potentially family-owned business is an emotive subject, that procedures are followed both in the first place to gain payment and, if required, later via legal means is clear. “Our team is always happy to discuss the circumstances of any debt to establish the best route of recovery,” Libby concludes.
Contact Libby Pritchard on libby.pritchard@backhouses.co.uk and Kai Leyland at kai.leyland@backhouses.co.uk
