Business creditor disputes and how to handle them

It’s helpful to know how to handle disputes with your creditors, as unfortunately if you’re not careful, the most straightforward dispute or disagreement could escalate to the stage where your business is under threat of closure.

Business creditor disputes

Disputing the amount charged on an invoice is just one frequent cause of disagreement in business and may be due to a simple misunderstanding at an earlier stage of trading, or perhaps to poor administrative procedures.

Other common reasons for disputes involve the quality of goods or services provided by a trade supplier, late or non-delivery, and also whether some or all of a specific debt has already been paid.

One of the best ways to handle creditor disputes is to minimise or pre-empt their likelihood of occurring in the first place, so what steps can you take to reduce the number of disputes with business creditors?

Avoiding creditor disputes

• Clear terms of trade

It’s possible to minimise the number of disputes that occur by setting out clear terms and conditions of trade within your contracts and other official documentation, and ensuring suppliers sign to confirm their acceptance.

• Build trust and gain support

Building a strong rapport with business creditors over time helps to deal with disputes when they do arise – a particularly important point with regard to your key suppliers. Communicate openly and develop a reputation for being a reliable payer.

• Shop around

Being aware of other suppliers you could use if a dispute harms your relationship with a current business creditor helps to prevent a problem with supplying your own customers or clients.

Is the dispute resolvable?

You may be able to settle the dispute by:

• Checking for a dispute resolution clause within the contract
• Communicating with your creditor in an open manner and listening carefully to their point of view so you can gain a deeper understanding of the problem
• Using a third party to help you resolve the dispute

What if the dispute isn’t resolvable?

If the dispute is about non-payment, and it isn’t resolvable, the creditor could take legal action against your business. So if the situation declines to this point, how do you handle court action by a business creditor?

• If your creditor takes action through the court they must send you a letter of claim. You can dispute some or all of the debt stated in the letter, but must do so within 30 days.
• If the creditor then decides to continue with legal proceedings you’ll also receive a claim form from the court. It’s advisable to seek professional assistance to lodge a defence when you’re in a dispute with a business creditor as it can be a complicated process.
• If you’re only disputing part of the debt you should fill in the admission form and the defence form included with the court claim form, and return them to the court.
• If you’re disputing all of the debt you need to complete the defence form and return it to the court within 14 days, but also complete the ‘acknowledgement of service’ form as you then gain an extra 14 days to put together a defence.

If you would like more information on how to handle creditor disputes in your business, call one of our licensed insolvency practitioners at Real Business Rescue. We can establish your legal situation and advise on your best options going forward – we operate an extensive network of offices around the UK so you’re never far away from professional assistance when you need it.