The introduction of a new debt recovery protocol in October will guide businesses (including sole traders) through a process that is designed to reduce the number of cases reaching the court system. Its purpose is to encourage early dialogue between both creditors and debtors in an aim for them to reach an amicable resolution without the need for potentially costly and long drawn out legal proceedings – proceedings that are clearly clogging the legal system.
My view on this is a bit of a mixed bag.
I can empathise with the argument that the new protocol will add time and complexity, to small businesses in particular when attempting to recover monies owed. It’s hard enough for small businesses to survive these days, without adding complexity. In an ideal world of course, it would be nice to be paid when delivering a great product and/or service, however this isn’t always the case unfortunately and perhaps a sign of the times.
I do however believe that the new protocol makes sense. It does require structured dialogue between parties on the subject of payment, although arguably it could be said that dialogue has probably already broken down at this point. That said, for the first time, the protocol is clear about what the dialogue should include and how both parties should communicate in a very clear and structured way.
Positively, the new protocol also encourages best practice in line with a trader’s legal responsibilities, especially in relation to The Consumer Rights Act (2015).
If a trader enters into a formal written agreement for goods and/or services with a customer, with clear terms of business including payment expectations, and then the trader delivers against commitment in a professional way, the protocol will absolutely protect their best interests. If the matter isn’t resolved within the new protocol guidelines, the trader will go to court in a strong position – most likely a stronger position than perhaps they currently would.
Long gone are the days for ‘cigarette packet quotes’ and ‘handshake agreements’. The law is quite clear about the responsibilities for tradespeople when transacting with their customers.
Enter into a proper written agreement with your customer and deliver against that agreement in full, and as an SME you’ve nothing additional to worry about when it comes to this new protocol… However, take the approach that ‘you’ve never had to do this before’ and it’s likely you’ll face a sticky wicket if facing a customer that doesn’t want to pay.
The British Institute of Kitchen, Bedroom & Bathroom Installation (BiKBBI) provides guidance to its members on a wide range of topics, including debt recovery.