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

We have a long-standing family business that imports products that we resell to businesses. Our clientele consists largely of garden centers and independent shops, but we also have one-man businesses that buy from us.

One of these sole traders owes us more than £15,000. We have established 30 day payment terms, but this has been going on for over a year, with a variety of excuses for non-payment.

Frustratingly, this company has a large social media following – including over 100,000 on Instagram – and often posts photos of them brightening up celebrity homes with our products. If only these celebrities knew how they treated our company.

If we go the legal route, the fees will likely wipe out what is owed. I sent a message on Instagram and they essentially said they can’t afford to pay – but they keep posting glossy photos to their celebrity clients.

What would you do in the circumstances? Is it inappropriate to leave messages on their social media posts?

We just want them to understand that we too are a small company that can’t let them get away with it.

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

it’s been hard enough for small businesses in recent years: the pandemic, rising prices and supply chain disruptions have forced many businesses to adapt or shut down.

I tell all my businesses to pay bills immediately, a small business that waits 30, 60, 90 or even 120 days or more could go out of business waiting to get what is owed to them.

Cash flow for a small business is like oxygen, and you need it to survive. I encourage all other companies that can afford it to follow my example.

Legal costs can add up to huge sums if you find yourself in a lengthy legal dispute that does not go to your liking. However, if you win the case, the costs should be assigned to you and paid by them if they have the means to pay.

There are ways to use the law to recover the money, which should not 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 try it on, hoping you write off the debt out of convenience. However, if they know you’re not taking it lightly and you intend to take action against them, they may decide it’s easier to pay than to go to court.

If they really can’t pay, they may have to close the business and you’re unlikely to get your money back.

However, if they could afford it, but just decided they’d rather keep the money, then I think there’s a good chance they’ll pay. If they are really struggling, they should be open to paying the debt in installments.

I suggest you send a final demand giving them 14 days to pay. If they still don’t pay, I recommend sending another letter before any action is taken, giving them seven days to pay or legal action will be initiated.

I would also suggest going through the money claim online, which for a £15,000 debt costs 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 don’t pay it can be sent to the County Court Bailiffs if the debt is unregulated. If it’s just an ordinary unpaid bill, it can be escalated to the Supreme Court bailiffs, who have much more power than the district bailiffs.

Any costs associated with the monetary claim will be added to the debtors’ debt.

I don’t think shaming them on social media in this situation is the right thing to do.

Aside from the possibility of violating libel laws if you say anything other than the absolute demonstrable truth, I don’t think it would be good for your own company’s image to be involved in a public altercation.

You may be in an online argument, and I don’t recommend you do this, no matter how frustrating and unfair your current situation is.

While it obviously won’t help you with this customer, I’m sure this case will prompt you to tighten up your procedures for offering credit terms.

A balance needs to be struck here as providing payment terms will help new customers grow and ultimately buy more from you in the future. But it inevitably puts your business at risk, especially when economic conditions are already tough.

The best approach going forward is to start offering limited amounts of credit to new customers.

You must also deliver goods with invoice terms that specify that all goods remain your property until paid for in full. This gives you a better legal position to reclaim the goods if payment is not made.

You can also look at the cost of taking out insurance against unpaid invoices.

I wish you the best of luck in collecting the money you owe and hope it does not affect the further success of your business.

Good luck!