Hi – some advice would be great. We’re a small business and back in October, order new desks/furniture for the office totalling a little over £2k. The supplier, at the last minute, said they couldn’t meet the agreed timetable so we, with their agreement, cancelled the order and agreed a refund. The supplier then told us they were in financial difficulties and couldn’t refund all our money immediately, so paid an instalment and agreed to refund the rest within 2 weeks. They at no point have said they wouldn’t pay up, just their cash flow doesn’t allow it.

I’ve communicated frequently with them, trying to be understanding but also pressing for the refund as it’s not right we fund their cash flow. I sent them a letter threatening court action last week, hopefully in a fair way as we need the money for our cash flow. This was their response:

Without prejudice, I write firstly to acknowledge you, as requested and to demonstrate to you that we are not ignoring you but that our financial situation has not changed since my last communication.
I thought that we had made our position clear with regards to your refund but in case it was not before, may I reiterate it now:
We have every intention of paying you the refund in full and have never stated otherwise.
Therefore, contrary to what you are suggesting below, we entirely agree that you need to be refunded – we dispute nothing surrounding your claim to a full refund.
By way of showing goodwill, I have just refunded £200 of the outstanding amount to you.

Any advice on a good next step?

Thanks

So how much do they still owe you?

If they’re on really shakey financial ground, then you’ll almost certainly be one of many people owed money, Unfortunately for you you’ll be well down the pecking order as rent/mortgages, loans, suppliers, etc will be trumping you. Taking them to court probably wont help either other than pushing them further towards liquidation. tbh, (if they really are struggling) I’m not sure how you can win, other than making sure communication channels stay open

I’d keep pressing. Its nice to give them time but there is a good chance they are doing this to a lot of people and if you are too far down list you won’t see a penny, especially if they go under, which sounds likely.

It’s a case of those who shout the loudest get paid soonest. I would go down the route of a small claims court. No doubt as soon as you notify of them this they will find the additional cash flow.

you don’t have a legal issue ,as they clearly accept liability you do have a tactical issue, if you do nothing they may struggle on and pay you or they may ignore you and pay others , they may go under and leave you hanging . If you sue they may find the cash and pay you off or it may be the final straw that makes them or a prior creditor take the company into liquidation.
Is the supplier a limited company or an individual / partnership. If individual / partnership i would tend to sue as people tend to buckle under pressure and realise personal assets or family cash where as companies tend to fold and leave their debts unpaid.

Send a letter before action (google it), it’s the last stage before legal action. Should knock you up the pecking order a bit…

It all sounds very dodgy to me. They took an order that they couldn’t fulfil and notified you of this at the last minute. This sounds to me like they have lost credit terms with their suppliers and using customers like you as lenders.
Proceed with a claim before they have the rug pulled out from under them even if you don’t get a full refund you will get more than the pence in the pound if they go to the liquidators.

It’s a case of those who shout the loudest get paid soonest. I would go down the route of a small claims court. No doubt as soon as you notify of them this they will find the additional cash flow.

This is a dangerous option…

At work I sort out debts etc and as a rule find that if you call them and continue to be supportive you’re more likely to get your money back than if you go in all-guns blazing.

But, more importantly what you should do is work out how you got into this ‘mess’ and make sure it doesn’t happen again.

thanks all. We are sympathetic as they sound like they’re in a bad position, but also, they’re using our money as credit so bit apprehensive. Not desperate to get legal so it was very much stressing the seriousness.

I’ve sent a ‘letter before action’ last week and they sent me the £200 goodwill payment – does this mean I shouldn’t/can’t continue informally pressing them for the money?

the letter before action preserves your position as to costs , in a legal action you incur costs such as court fees and lawyers fees . The court can award those costs to either side so a legitimate claimant or defendant should not be out of pocket for being right. No letter before action and the other-side will say why should i pay his costs/fees i was always willing to pay so the claimant may recover their debt but have to foot the legal bill possibly of both sides if they have been totally unreasonable.

Having sent a letter before action you are free to do nothing or carry on negotiating but you would be best advised to send a further one if you let your deadline slip.

They and you have not done anything to preclude you acting by the payment and acceptance of £200 at this stage (this would be different if residential rent arrears.)

“Agree for the Law is Costly”

At work I sort out debts etc and as a rule find that if you call them and continue to be supportive you’re more likely to get your money back than if you go in all-guns blazing.

Yes, but if you just sit there doing nothing they’ll think that you’re OK with them using you as a free bank loan.

These people are not clients who you may want to preserve a good relationship with for future sales. These people are using you to pay their salaries for them.

Seeing as the letter before action got £200 I’d be very keen to legally ‘register’ the fact that they owe >£1k , and the best way to do this is to go to the small claims court. It will not guarantee you your money back but it’s a step in the right direction. You have nothing to lose by claiming, but sitting back and just hoping they’ll pay you back is daft.

At the very least you should send them a written payment schedule and make it abundantly clear that if they miss one payment you will start action with no further warning.

[If a bank loaned you money they wouldn’t hesitate to pursue it legally if you didn’t pay them back.]

Aus,

We generally find that applying the statutory interest is a good way to get attention and up their priority list. https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt

As a rule if they agree the debt (which they seem to) then a small claim action only moves things a tiny step forward, and potentially two steps backward. After the small claim you still need to get the money from them. This will generally involve a long delay, and/or bailiffs charges. If the company really is in dire straights then you will still be stuffed (and have the costs to pay) because they will go bust and you will almost certainly get nothing. If you do want to go that way a “Statutory Demand” may be just as effective.

I’d be inclined to reply to the above post stating that whilst you appreciate their difficulties, they are not your problem, and therefore if the outstanding sum of {xxx] remains unpaid in [7 days] you will be exercising your rights in the The Late Payment of Commercial Debts (Interest) Act and charging interest backdated to when it fell due. If the company wishes to enter into an arrangement to pay the debt over time you will accept [£200 per month] – but interest will be charged. If they wish to enter into any longer payment plan I would ask for (i) a directors guarantee; (ii) the latest management accounts; (iii) a letter from their accountant on the prospects of repayment.