Adam Bernstein offers advice on contracts and outlines how to deal with late payments
According to risk manager Atradius in its October 2018 Payment Practices Barometer, the UK has the highest proportion of overdue invoices in Europe at a staggering 48.7%. The next worst is France at 47.45% followed by Switzerland at 46.5%. Those wanting prompt payment ought to relocate to Denmark where overdue invoices stand at 32.65% or the Netherlands, which has just 34.55% of invoices overdue.
The problem for firms working via contract (rather than by cash payment), when dealing with late payments, is what to do to speed up the process.
Philippa Dempster, Managing Partner of law firm Freeths, thinks debtor days are being pushed out for a number of reasons, notably, “electronic invoicing and payment systems, that seem to slow things down as details have to match precisely, and purchase order numbers which cause issues too.”
The difficulty with getting paid
Problems for many are caused by the lack of documentation. Paul Carrotte, head of collections at ICSM, a debt recovery specialist, thinks that firms need to become more guarded with their approach: “Industry has moved beyond gentlemen’s agreements. A simple handshake and ‘my word is my bond’ was once enough to seal many a contract, but not anymore.”
And Alex Hilton-Baird, Managing Director of Hilton-Baird Collection Services, agrees. Experience has taught him that “whether a signed contract, proof of delivery or terms and conditions, it can be difficult to recover payment without proof of the debt.”
A similar view is taken by Dempster. As a lawyer, a good contract goes to the core of excising delays. She advises firms to insert two key provisions into their contracts – a right to suspend services if there is no payment and the terms have been exceeded; and secondly, that a contract can be terminated if payment is late.
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