By Samuel McMahon

13 May 2014

One of the most important parts of running a business is debtor management. But inevitably, however well you manage your customers, sometimes a customer will not pay, either because he or she can’t pay, or he or she no longer wants to. The time eventually comes round for enforcement.

One aspect which often lets businesses down is poor debtor management, specifically when the need arises to enforce a debt is the lack of adequate details about work performed and materials used. Courts often do not take invoices at face value. If tested in Court, the Magistrate usually requires the following:

  • A detailed breakdown of every hour worked;
  • The identity of the person who did the work;
  • A breakdown of every item of material used; and
  • Evidence of the cost of that material.

There is in most cases no better evidence of this than a diary entry made on the day of the work that was done. In contrast, if you wait until the time comes around to issue an invoice to estimate in retrospect what work has been done, and the cost of the work is challenged, the risk you run is that a Magistrate may choose to disagree with your estimate and discount your invoice significantly.

Clients who are most often caught out are clients in situations where there was originally a fixed-price contract, but some disagreement or other obstacle arises and the whole project is not completed as originally planned. In this case, often there is a scramble to work out exactly what has been done, when, and by whom. Also, materials used may not have been recorded in detail or at all and need to be back-estimated. Keeping a work diary in fixed-price contracts may appear unnecessary at the outset, but if things don’t go to plan it can be invaluable in backing up your claim.

We recommend the following:

  • Keep a record of all work done and all materials used
  • Record it on the day the work is done or the materials used
  • Record whether or not you think you will need the record later.

Good record-keeping is invaluable in strengthening a case to get the money you deserve from a customer who doesn’t want to pay.

 

For more information please contact Samuel McMahon or a member of the Dispute Litigation Team.

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