Contractors, beware errant agency directors in 2024, even if you run credit checks and are up for the invoice-chase

Many contractor limited companies will be glad to see the back of 2023 because it was yet another strenuous year for UK SMEs.

But beware. We predict the greatest concern for tiny businesses in 2024 will remain late payment, and new IPSE-Workwell findings published today suggest we might be right on the money, writes Adam Home, senior collections manager at Safe Collections.

Here's why the screws on contractor suppliers are being turned

Our reasoning? Well, as companies attempt to combat the ongoing economic challenges and as credit lines continue to dry up, cash flow becomes strained and businesses often see the easiest way to raise working capital is to delay payment to suppliers -- like contractors --wherever possible.

When 2023 closed, we continued to see an increase in both these delays and the knock-on payment issues and stress this caused to independent suppliers of goods and services.

Be rigorous in your credit checking

A healthy cash flow relies on effective and proactive credit control. So to contractors we say this – it’s vital to rigorously credit check all customers, new and existing, before entering into any financial arrangement.

Even when you get busy and a new client comes on stream, try to remind yourself that the impact late payments has on small enterprise is both undeniable and more pronounced in the current economic climate which, as we enter 2024, shows no sign of suddenly improving.

Therefore don’t hesitate to escalate unpaid invoices and outsource assistance if needed, just like one IT contractor did.

A cautionary tale: Dodgy Agency Ltd and its threatening boss

In fact, we recently had a case where a UK based employment agency issued a contract to a UK contractor in the name of a fictional US employment company. Let's call them Dodgy Agency Ltd -- ostensibly domiciled in the state of New York with a New York company number. 

However Dodgy Agency Ltd does not and never has existed in the state of NY (or anywhere in the US)! The only place Dodgy Agency Ltd is registered is here in the UK, where it bears a different UK company number, helping to hide its tracks.

The director of Dodgy Agency Ltd sniggered when my team and I telephoned him to chase the hefty $10,000 payment owed to our contractor. The director laughed at the contractor, my team and myself, even being threatening at one point by saying, "What you gonna' do?”

Just deserts

The errant agency director was presumably banking on being able to hide behind the fictitious US entity to pocket the contractor’s money; about £7,900.

The same dismissive response no matter which member of my team this case involved was received.

Unfortunately for Dodgy Agency Ltd, we have decades of experience in handling these less than reputable employment agencies. And so, one well-placed complaint to the relevant governmental authority on the contractor’s behalf later, our contractor received FULL payment. Oh, and perhaps even better for other contractors who come into its path in future? Dodgy Agency Ltd is currently experiencing the sharp end of an investigation into their trading practices.

Avoiding late payment this year, in a nutshell...

My final tip for 2024 is to be proactive on all your invoices and ensure any agreements entered into by yourself or your company post-credit checking your agency/client/new business partner, are documented -- and signed -- so that there can be little-to-no room for dispute.