With UK businesses currently waiting to receive over £42 billion in late payment of invoices for the supply of goods and services, we thought it would be interesting to look at the most common excuses used by debtors to try and explain why they have failed to pay on time. If you work in a credit control department or in the debt recovery industry, you will no doubt be familiar with many of these well used tactics to avoid or delay payment.
We would like to thank the CSAS and our fellow CSAS members for their responses to our survey, which has allowed us to publish this information. It’s interesting that many of the excuses have been used for decades and are still used today, despite the facts that payments can be sent and received online in minutes and real time company information can easily be found with a quick Google search.
Well were a friendly and helpful bunch here at Advocate, so we are not only going to list excuses that companies use to pay late, we have also asked our own in house expert with over 30 years of experience in the industry, Tim Jennings, to supply some effective responses.
1. We can’t pay you until we get paid!
“We are still waiting for payment from contractors/suppliers to make payment before we can pay you”
Tim says: “This is the oldest trick in the book, how do you know they were not been paid months ago? If you have not agreed to be paid when they get paid before providing services or completing works, demand payment according to your Terms & Conditions of Business, you have a statutory right to be paid on time as agreed.”
2. We sent you a cheque!
“We sent you a cheque on Friday, wait a week and if it does not arrive we will send a replacement”
Tim: “Very few companies now pay by cheque, why would they when it’s much faster and more cost effective to pay by bank transfer, this is simply a delaying tactic. If a debtor claims to have sent a cheque and you have not received and banked it, the debt remains unpaid. Do not waste your time asking them for proof of postage or to cancel and re-send the cheque, demand immediate payment by bank transfer, if they are genuine there will be funds in their account to cover the cheque and therefore an immediate bank transfer.”
3. Let’s raise a spurious dispute!
“We cannot pay the invoice there is a dispute on the account”
Tim suggests: “The use of a third party debt collection practitioner is a good way to distinguish genuine disputes from spurious disputes. During the debt recovery process your client or customer will have ample opportunity to raise a valid dispute and supply supporting documentation. Occasionally the dispute is genuine, for example one of a thousand products being damaged in transit, a small value credit note resolves the dispute and full payment follows shorty. However, if you have not been advised of a dispute prior to the payment going beyond terms, chances are the dispute is spurious and an attempt to delay or avoid payment.”
4. What invoice!
“You have not sent us an invoice”
Tim explains: “Possibly the easiest excuse of all to use to delay payment and also the easiest to rebuff. Respond by explaining that the goods or services have been delivered, and demand an email address or fax number to send a copy invoice. The law is on your side following the Prenton Industries Limited v Samson Bros Limited case of 2001, which was decided in the High Court and confirmed that the due date for payment of commercial invoices is 30 days from delivery, not 30 days from receipt of invoice. Please also ensure you send your customer a monthly statement to help in preventing lost invoice disputes.”
5. The invoice is incorrect!
“There is a mistake on the invoice so we cannot pay it”
Tim says: “Mistakes do happen, but even if there is an error, it is not an acceptable reason to withhold payment completely. Offer them seven days grace and send by email an amended and correct invoice, or providing you agree there is an error, ask them to immediately pay the correct amount and issue a credit note to cover the error.”
6. The boss is on holiday!
“We are waiting for the boss to sign the check and he is on holiday”
Tim: “This is a really annoying excuse often used by smaller companies. If the account is overdue demand payment by BACS, card or online payment, they will have these facilities in place, even the smallest of firms cannot in this day and age conduct business with just a cheque book.”
“The managing director has died”
Tim explains: “A sensible and diplomatic approach is required to what could be a most delicate situation. However, business goes on, the payment remains outstanding and obligations must be met by limited companies. You should judge each situation on its own merit, but bare in mind that this excuse is offered in far more situations than you may think.”
8. We have gone bust!
“The company has entered into receivership/administration/liquidation”
Tim says “Do not accept this without confirmation, you need to ask questions and then check with companies house. Who are the administrators/liquidators, what date, what’s the reference number.”
Tim adds: “Check your conditions and terms of business to find out if you have a claim to intellectual property or security that can be used to recover items/goods supplied to the company.”
9. The empty accounts office!
“There is no one in accounts today”
Tim: “The oldest and most used trick in the book. It is so easy to avoid creditors and payment by instructing reception to tell callers there is no one in accounts today. Ask to speak with the managing director or a senior director and do not take no for an answer, you may be surprised how quickly someone from accounts becomes available.”
10. The banking bluff!
“We’re switching banks this week”
Tim explains: “Moving accounts to a new bank could be a genuine reason for a delay in payment of a few days, anything more is just another excuse for late payment.”
So there you are. The top ten most common excuses used by UK companies to explain late payment. We hope that the next time you hear one of these excuses from a trade debtor, you will now be more informed and assertive, and that this will help you recover payment more quickly.