A customer owes me £15,000, what should I do? BANK OF DAVE replies

We run a long-standing family business which imports products that we sell on to firms – our client base largely consists of garden centres and independent shops, but we also have sole traders who buy from us too.

One these sole traders owes us more than £15,000. We set out 30 day payment terms, but this has gone on for more than a year, with a variety of excuses given to us for non-payment.

Frustratingly, this business has a large social media following – including more than 100,000 on Instagram – and they often posts photographs of jazzing up celebrity homes with our products. If only these celebs knew how they’ve treated our business.

If we go down the legal route, it is likely the fees will wipe out what is owed. I messaged on Instagram, and they said essentially they cannot afford to pay – but they continue to post up glossy photographs with their celebrity clients.

What would you do in the circumstances? Is it uncouth to start leaving messages on their social media posts? 

We just want them to understand we too are a small business who cannot allow them to get away with it.

Dave Fishwick, This Is Money’s business doctor replies: I can understand your frustration.

it’s been hard enough for small businesses in the last few years: the pandemic, rising prices and supply chain disruptions forcing many businesses to adapt or close down.

I tell all my businesses to pay invoices immediately, a small business waiting 30, 60, 90, or even 120 days or more could go bust just waiting for what is owed to them.

Cash flow to a small business is like oxygen, and you need it to survive. I encourage all other businesses who can afford it to follow my lead.

Legal fees can escalate to huge sums if you end up in a protracted legal dispute that doesn’t go your way. If you win the case, though, the costs should be awarded to you to be paid by them if they have the means to pay.

There are ways to use the law to recover the money, which shouldn’t be prohibitively expensive. It may be that just the threat of legal action will be enough to get them to pay what they owe.

They could just be trying it on, hoping that you’ll write off the debt out of convenience. If they know that you’re not just going to take it lying down and you intend to take action against them, though, they may decide that it’s easier to pay than end up in court.

If they genuinely can’t pay, they may have to fold the company, and you’re unlikely to recover your funds.

If, however, they could pay it but have just decided they’d rather keep the money, then I think there’s a good chance they will pay. If they are genuinely having a tough time, they should be open to paying the debt in instalments.

I suggest you send a final demand letter giving them 14 days to pay. If they still do not pay, I recommend sending a further letter before action, giving them seven days to pay, or legal action will commence.

I would also suggest going through the Money Claim online, which for a £15000 debt, will cost 5 per cent of the claim (£750). This would then be processed through the courts, and if successful, a County Court Judgment would be issued against the debtor.

If they still do not pay, this can then be sent to the County Court Bailiffs if the debt is unregulated. If it is just a regular unpaid invoice this could be escalated to the High Court Bailiffs who have a lot more power than the County Court Bailiffs.

Any associated costs with the Money Claim will be added to the debtors’ debt.

I don’t think that shaming them on social media is the way to go in this situation.

Apart from the potential to fall foul of libel laws if you say anything other than the absolute provable truth, I don’t think it would reflect very well on the image of your own company to be involved in a public spat.

You may find yourself in an online argument, and I don’t recommend that you do this, as frustrating and unfair as your current situation is.

Although, of course, it doesn’t help you with this customer, I’m sure that this case will make you tighten up your procedures for offering credit terms.

There is a balance to strike here, as providing payment terms will help new customers grow and ultimately buy more from you in the future. But it inevitably risks your business, mainly when economic conditions are already harsh.

The best approach in the future is to start by offering limited credit amounts to new customers.

You should also supply goods with invoice terms and conditions that specify that all goods remain your property until they are fully paid for. This will give you a better legal standing to recover the goods if payment is not made.

You could also explore the costs of buying insurance against unpaid invoices.

I wish you luck in recovering the money you’re owed and hope it doesn’t affect the continued success of your business.

Good Luck!