Top tips for staying out of court
10 May 2018
By Liam Entwistle, Partner, Wright, Johnston & Mackenzie LLP
Conflicts, like taxes, are inevitable. If you are in business, sooner or later you won’t see completely eye to eye with someone, and will fall out with them. If you are lucky, you will be able to get it sorted quickly and economically, and get on with making money. If you are unlucky, well, you may end up paying tens of thousands of pounds to some lawyer to help you through court.
If you are starting up, you will need all of your cash to make sure that your hard work translates into business success. You absolutely do not need to have a distress purchase on your hands, like litigation.
The real trick is, staying out of court in the first place – that’s where an adviser really earns their corn. Conflict may be inevitable, but there are ways to considerably reduce the chances of a business having to drag someone else through a court to get paid (or being dragged through themselves).
Here are some suggestions about the best way to avoid spending hard earned money on litigation.
- Know exactly who you are dealing with. It’s worth doing a quick check to make sure they are who they say they are. Do you have a trading name or the actual name of the organisation? Even if it appears to be a large household name, you need to know exactly which bit of it you are entering into an agreement with. Always consider getting a credit check.
- Do shake hands, but then get something in writing – and make sure it’s what you think you agreed. Don’t assume that because you discussed something previously that your discussion will “trump” what’s in writing.
- Watch out for the small print. You may get handed standard terms and conditions. It’s a bore, but you must read these. They may contain nasty surprises.
- Have your own standard terms. Don’t copy these from anyone else – have a think about what your business needs to survive and thrive. You may not always be able to impose these terms, but you should have them ready from the minute you start your business.
- Raise problems as they arise. If you wait until you are getting final demands before you raise issues with the services or products you have received, your chances of receiving a Writ and seeing the inside of a court will increase exponentially. Keep communications open.
- Ensure you get paid promptly. Remember, issuing invoices is great, but invoices don’t pay the bills. Always be on top of your invoicing and get your cash in. if your payment terms haven’t been met, you need to know why quickly. A call to a debtor just before the payment term is due to expire can get you to the top of the payment pile.
- Find out when your customers normally do their paying runs and invoice accordingly. That can make the difference between getting paid in your terms, or waiting another month.
- Have terms and conditions and basic policies for your employees. Remember that after two years they will have the right not to be unfairly dismissed. Use probation periods and air concerns early doors (see 5 above) – if an employee is not cutting the mustard, wish them luck at the end of their probation period. Don’t assume that they will come good.
- If you do fall out with someone, remember there are other ways to get things sorted than going to court. You may want to mediate, which is very cheap, very quick, and gives you a chance to preserve the business relationship. It works most of the time if you have a decent mediator. You may want to consider arbitration, which is cheaper and quicker than a court, and is also private. But these solutions require agreement from the other side – so you should put them in your standard terms.
- Get advice early (see 5 above). It’s easier for advisers to help sort a problem if folk aren’t already in the trenches!
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