Cash flow is paramount to the success of any business – big or small – and debt recovery can be key. We recently supported one of our healthcare clients to recover £40,000 of unpaid debts.
The majority of our care home clients have contracts in place with their local authority (LA) for the provision of care services to their residents. One of our clients recently had a problem where the local authority were refusing to pay approximately £40,000 of their fees. The question was, was the LA entitled to withhold payment under the contract?
Debt recovery
Under the contract, our client was required to submit invoices to the LA each month, detailing how much was owed by the LA in relation to that particular resident’s care package. Due to some internal administrative issues, when discussing invoices with the LA our client informed them that all outstanding invoices had been submitted.
Unfortunately, our client later discovered that several invoices had not been submitted. When they contacted the LA to let them know that a mistake had been made and that they required the additional payment, the LA informed them that they would not be paying those invoices due to what our client had said previously. If the LA were to withhold payment from our client, this would have had a catastrophic impact on our client’s cash flow.
That’s where we stepped in.
We were instructed to undertake a review of the contract between our client and the LA. In particular, we were tasked with identifying whether the LA were contractually entitled to adopt this stance. Our review revealed that the LA did not have authority to withhold payment.
Dispute resolution over unpaid invoices
During our review, we also looked at the dispute resolution provisions in the contract. The contract stated that if a dispute occurred and one party wrote to the other seeking to remedy the dispute, both parties would need to meet within 10 working days to resolve it. If the parties could not resolve the dispute at that stage, it would be referred to mediation. Ultimately, if mediation didn’t work it would be referred to expert determination for final resolution which would be binding on the parties.
We explained this process to our client and upon their instructions, wrote to the LA asking for a meeting to discuss the dispute and requiring them to provide confirmation of the basis on which they considered they were contractually entitled to withhold payment.
Following receipt of our email and some toing and froing, the LA accepted that they were not contractually entitled to withhold payment to our client, and agreed to pay without the need for a meeting. This was a huge relief to our client who wrote to us saying:
“Thank you very much for your input on this matter. I believe that we would still be in the same position today without your involvement”.
Debt recovery help for healthcare clients
If you are experiencing issues regarding payment please do not hesitate to get in touch with our Debt Recovery team and you might get a “win” too.
Don’t let debt distract you from your business ambitions. We recover debts of all sizes for businesses of all sizes, allowing them to maintain focus on their future success. Find out more about DebtLink costs to support your healthcare business.