Businesses often find that clients fail to pay their invoices by the due date. RMB Specialised Commercial Lawyer, Michael Lewis, discusses the legal action businesses can take if they are having trouble with late payments.

Payment of invoices in a timely manner is critical for a business and its cashflow. So what can you do when your client won’t pay an invoice?

Most businesses start by sending email reminders or give the client a call to request urgent payment. They may give the client every opportunity to pay, but in return may be given every excuse under the sun why the client can’t pay now but will pay soon.

We recommend that businesses or individuals engage the services of a solicitor to draft and send a letter of demand.

This letter is a final demand for payment before taking legal action. It outlines the outstanding debt, specifies a timeframe in which the debt must be paid (usually 14 days) and states that where payment is not received within the timeframe specified, that the party owed money (creditor) will commence court proceedings for recovery of the debt, any legal costs and interest.

We often find that a letter of demand on a solicitor’s letterhead is an effective way to convey the seriousness of the matter to the debtor and to encourage prompt payment of the debt.

After having received a letter of demand the debtor may:

• Pay the debt in full;
• Request that they enter into a repayment plan; or
• Fail to pay the debt.

We highly recommend that a repayment plan be formalised through a written and signed agreement.

Where a debtor fails to pay within the timeframe specified, you can commence proceedings in the local court by filing a Statement of Claim and serving it on the debtor. This outlines the details of the creditor (the plaintiff) and the debtor (the defendant). In a Statement of Claim the plaintiff must plead their cause of action and must particularise their claim.

Solicitors at RMB Lawyers are skilled in preparing court documents and can assist by drafting a Statement of Claim on your behalf.

Importantly, you must serve the Statement of Claim on the defendant correctly, depending on whether the debtor is an individual or a company. You should seek legal advice to determine how to validly effect service on the defendant.

RMB Lawyers can assist businesses who are having issues with late payments.