Advocate were instructed by a Bristol-based specialist IT Recruitment Agency to recover payment of two overdue invoices totalling £7,920.00, which had been issued to a London based Software Development Company. Three further invoices had also been issued, which were not yet due for payment.
The invoices related to the permanent placement of two graduate software developers. Following instruction by the Software Development Company, our client headhunted the two graduates and carried out negotiations and due diligence with the parties to reach amicable offers of employment. On commencement of the employment, our client issued the invoices based on the agreed commission of 10% of the starting salary and agreed on payment terms of 30 days.
Shortly before the invoices became due for payment, the debtor advised the creditor that they would not be paying any of the invoices unless a discount was applied to the pre-agreed commission rate. There was no valid reason for the debtor to request a discount as the creditor had fulfilled their obligations, and the debtor still employed all of the graduates placed. The creditor was being pressured into accepting a discount in return for receiving payment, a situation they were not prepared to tolerate.
We collect the invoice sums and our costs from the debtor
The creditor did not wait for the later invoices to become overdue and instructed the Advocate when the two earliest invoices were not paid on time. We commenced action and issued a Notice on the day of our instruction. The Notice included debt recovery costs. Under current late payment legislation, creditors are entitled to claim debt collection costs, including those of a third party instructed to collect payment of a commercial debt. Advocate claim and collect the debt collection costs from the debtor in addition to the principal invoice sums.
Full payment of the principal invoice sums and the late payment charges that makeup Advocate’s fee was received on day six of our action. A faster payment of £7,920.00 was transferred to our client’s bank account the same day.
We then recommended that our client contact the Software Development Company to advise them that if the three remaining invoices became overdue for payment, Advocate would again be instructed, and late payment charges and debt collection costs would again be applied. The invoices were paid in full just before the payment due date.
Late Payment Legislation
The above scenario is a perfect example of why the UK Government introduced late payment legislation, it not only penalises late payers, it also educates late payers to pay on time in the future. Most businesses are aware of the legislation, yet few actually enforce it for fear of upsetting their customers and losing that business. If more businesses enforced late payment legislation and claimed the statutory charges to which they are entitled, it would become common practice. If that was the case, and debtors expected to have to pay late payment charges if they settled invoices late, rather than expecting their creditors not to apply the charges, then far more invoices would be paid within the agreed payment terms.