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josielion
6th January 2004, 16:09
My company has been providing sales support to a consultancy for the past 10 months - very successfully. We have been paid all commission owed for the first 6 months of the contract but the client refused to pay July's invoice and we haven't been paid since then. They now owe us in excess of £40k. In August we met to discuss re-negotiating the contract on terms that are pretty unfavorable to us - in fact the new terms would mean a reduction in our potential revenue of at least 30%. The current contract is still in force and ends at 31 January - they are trying to pressurise us into signing the new contract, with the unfavorable terms, and backdate this contract to the beginning of August! Any advice?

www 1staccountancy biz
6th January 2004, 17:16
Sounds like your clients have severe cash flow problems...I would be tempted not to agree to the new contract if they want to back date the terms of the contract. They agreed to the original terms and you have supplied the service for which you were contracted.

You wouldn't buy a car for £40k then decide to go back to the garage 5 months later to tell them you want a refund & would like to renegotiate the terms of purchase!

In addition, they still owe you £40k!! What's to say they won't come back 12 months later and want to renegotiate again. :x

You also have to consider whether you would like to continue working for this company...if so then you may have to bow to some of their demands but get the £40k paid up front. :rolleyes

AtW
6th January 2004, 21:07
surely if they can't fulfil their obligations, ie pay you what they owe, they can be promotly declare insolvent - not a friendly move but 6 months unpaid is not a friendly move either. I'd talk to solicitor.

embedded munich
6th January 2004, 22:11
Depending on how urgently you need further business with this client and how attractive the deal is overall, I would follow either of the following strategy:

1. Agree to the reduction (maybe less than 30%) and in return try to negotiate receiving a binding purchase order from the client which will allow you to provide further services for a specified time (e.g. for another year)

2. Stop providing further services immediately. Indicate you're willing to discuss the revised terms but only after at least 70% off all open invoices are paid immediately.

I'd suggest to come to a conclusion without considering any legal implications and purely depending on how attractive (further business with) this customer is compared to any other business you may have or be able to get.

James of Lawspeed
7th January 2004, 12:02
I would suggest that you make efforts now to document exactly how much is owed and, for evidential purposes, make sure your records are clear on this. Given the length of time that has elapsed you must make a written demand for the unpaid monies - even if couched in reasonably polite terms.

From a risk management perspective it is not prudent to allow unpaid debts to build up for this long, and you must seriously consider whether this is genuinely a client that you should enter into any further commitments with. As a general rule of good risk management, a business should not contract with a customer that has a track record of late or non-payment. However you must of course balance this with other prospects.

From a legal perspective get your evidence together now, and make a written demand for unpaid monies. Remember that you are entitled to charge interest on late payments (although interest payments are zero-rated for VAT) and this will have built up considerably over that time period. You may wish to use this statutory entitlement as a negotiation tool.

James - 01273 236236
www.lawspeed.com (http://www.lawspeed.com)
Lawspeed Limited
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