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Welcome to our April Commercial Credit Management Q&A Blog

Credit management frequent questions

Question One: we are an expanding business providing IT support services on an ongoing monthly contract value but have additional projects for customers for either hardware only, service only or hardware/service mix. As we have an increasing customer base, we would like to automate our credit limit setting for the additional projects using data from credit agency ratings, existing support monthly billing, trading history and projected future sales. How best should we use this information?

Answer: Credit limits should be based on ability to pay rather than your desire to sell, therefore I would exclude projected future sales and existing monthly billing from the credit limit calculation. However, from a commercial prospective, once the credit limits is determined, if it is not adequate top cover the project, a commercial decision can be made after weighing up risks. However, in this cases, it may be wise to look at other ways to mitigate risks, such as asking for hardware purchases to be paid (in full or in part)  in advance or on very short terms after installed (e.g.7 days) stage payments on milestones during the project.

Question Two: We have a customer who has recently changed their business name with Companies House, however the company number and address remain unchanged.  Do we need new signed Contract paperwork for the new business name?

Answer: As it is the same legal entity, you don’t need to get a new contract signed, but you may wish to, to be belt & braces as it were.

Question Three: We have a customer who is refusing to pay an invoice saying he has disputes but will not confirm what exactly the disputes are. How do we respond?

Answer: One of the court’s overriding objectives is that parties make every attempt to settle a matter before litigation is commenced. If they don’t, the party who refuses to cooperate can be penalised in costs by the court. I would respond mentioning this objective to the debtor. If needed say something such as:

We refer you to Part27 of CPR. The Court’s pre-action protocols state that both parties should act in a reasonable manner and make full disclosure of all facts they intend to rely on in a hearing with the aim of negotiating settlement before a Claim is issued in the County Court. Part 27.14.2.g states:  such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonablyTherefore we reserve the right to being all pre action correspondence to the court’s attention when the matter of costs is decided.

Ensure you issue a full  Letter Before Action to the Debtors registered office so you can prove you have complied with the court’s pre-action protocols.

Question Four: We are an events company and we ask customers to sign a ‘Booking Form’ which says “terms and conditions available on request”. If the customer does not cancel the booking within a specific timeframe the customer has to pay 50% of the stand fee they booked which is detailed in our terms and condition. Can we rely on our terms and conditions?

Answer: Common law says that terms and conditions must be “made known to the buyer”  for them to be able to “accept” the offer including the terms. Stating the terms are available on request may not be enough to convince the court your customer has accepted them. I would suggest as a minimum you add a url that goes to the terms and conditions on your website, to your booking form which will allow the buyer to look at them inline before accepting them. More ideally, you want those terms and conditions with the booking form and ask them to confirm their agreement to those terms when signing the form.

N.B Jenny is extremely experienced in contract law, is a fellow of the Chartered Institute of Credit Management and has successfully assisting clients to obtaining Judgment on disputed debts for the past 35 years. All advice given in blogs and on CMG UK’s website is from her experience and qualifications . This advice is not a substitute for specific legal advice and should not be relied upon as such.