In this blog, Jonathan Wilby of ourLitigation Department, discusses the issue of late payment of business debts.
A recent survey by Zurich Insurance revealed that at any one time 1 in 5 SME businesses are owed in excess of £25,000 in late payments and 1 in 10 is owed more than £100,000. Just imagine what benefits those businesses would gain from having that money in their own account for them to use to reduce their own borrowing, to pay their own debts, to invest in people and technology and ultimately to pay the business owners for their enterprise and endeavours.
Bad debt can be a particular problem if it is with just one or two key customers. That situation is not at all uncommon and can creep up for a variety of reasons but the risk to the unpaid business is massive. If a key customer goes bust, often so do the major suppliers who were over dependent on their custom.
We can help to protect your business from the risk of bad debt by reviewing your processes from terms of business through to orders, delivery, invoicing and then payment collection.
Almost every business carries some level of overdue payments. Some sectors are more vulnerable than others and we understand the particular risks faced by different types of businesses. Having robust payment processes in place will avoid the incidents of late payments and helps us to deal with the most common excuses for payment delay such as:
• The cheque’s in the post: Archaic but still used as a try-on. It shouldn’t happen in these days of electronic banking.
• We haven’t had the invoice: Early payment due reminders will flush this out before the payment is overdue.
• We will pay you when we get paid: Wrong – as long as your terms and conditions have been applied.
• We have gone bust: Not what you want to hear but is it true? We can check it out and advise you about what will happen next, including recovering goods that you have supplied if your terms and conditions allow it.
For payment collection we have a dedicated debt recovery lawyer, Alan Mattocks who has experience of all sizes of debt, sectors and situations. To see our debt recovery guide please click here.
For debt or insolvency problems please contact any of our litigation team or for terms of business and trading processes please contact our corporate team.
Owner Managed Businesses Forum
If you’re an owner managed business, our forthcoming event, and offer of up to an hours free legal advice, may be of interest to you