I read in the news this week that small to medium enterprises in Britain wrote off £5.8 billion in debt in 2015, amounting to a staggering £21k every day.
The statistics released by Direct Line for Business also found that one in five businesses are writing off debts with an estimated average loss of £31,330, whilst one in ten SMEs claim to have written off debts in excess of £100,000.
Respondents to the survey have a number of reasons as to why these SMEs chose to write off these debts including; suppliers being unable to pay due to insolvency, businesses not wanting to damage future relationships with their suppliers, or even just thinking that their suppliers would have insufficient funds to pay their debts. Furthermore, many businesses are claiming that they lack the funds to be able to chase the debts through the Courts.
I see this a lot and find it alarming that so many businesses are prepared to write off significant amounts of money. Late payments can be a serious threat, especially for small businesses who depend on prompt payment to retain cash flow.
As a debt recovery solicitor, I regularly advise businesses on the best way forward to recover payments owed to them. Here are a couple of tips to help, should you find your business in this situation.
- Talk to your debtor – this should always be the first port of call and by doing this you can try to reach an agreement whereby payment is secured and the relationship is maintained and most importantly, future business is protected.
- Know your Terms and Conditions of business – ensure that you know when payments need to be made and any interest that will be incurred on late payments. Consider reviewing these in the event of unpaid invoices and recurring debt problems, perhaps tightening payment terms or adjusting interest where invoices are outstanding.
- Keep a record – ensure that you keep a record of all correspondence (details of telephone calls emails and letters), as these will be crucial if you do have to take further action.
- Take specialist advice – If you are unsuccessful in recovering your debts, a formal letter from your solicitor demanding payment is often successful.
- Court proceedings – if all else fails, then Court can be an option but hopefully a last resort
It’s always important when taking further action to maximise what you can cover. Creditors are entitled to recover compensation arising out of late payment, alongside interest as set out by standard business terms and conditions. As an alternative, you can recover interest pursuant to The Late Payment of Commercial Debts (Interest) Act 1998.
For any further advice on debt recovery, or if you are struggling to get payment and looking to initiate legal action such as court proceedings or issuing a statutory demand, please do get in touch with myself or one of our debt recovery solicitors by calling 0845 287 0939 or by completing an online enquiry form.