Small businesses in particular are at the highest risk of falling victim to debt as clients are taking longer to pay their bills than in recent years. Research conducted by Latimer Hinks Solicitors shows that in the last two years 85 per cent of businesses have seen up to three quarters of their clients take longer to make their payments.
Financial directors and business owners who took part in the research said that 94 per cent of clients took an extra three months to pay bills, with the other 6 per cent taking six months longer than usual. The findings of this research is of particular interest to Mark Gardner, a Partner at Latimer Hinks and a specialist in debt recovery and insolvency. He has been involved in insolvency and debt recovery work since the Insolvency Act 1986 was introduced.
Mr Gardner commented on the findings: “Three quarters of those who took part in the research said that their businesses had been affected by cash flow and resource availability issues as a result of slower payments coming through, so this is clearly a problem which they cannot ignore.”
It is not all bad news though as the research showed that many businesses were successfully utilising legal methods to recover their debts. Mr Gardner continued: “Reassuringly, 42 per cent said they had not taken the matter lying down and had actually gone as far as taking county court action to recover unpaid invoices. However, 70 per cent had made no changes in their own terms of payment for suppliers during the two year period.”
The Latimer Hinks Partner offered some advice for companies who may be suffering from bad debt problems: “Businesses must stay vigilant and avoid sleepwalking into problems. Bad debts can build up, especially in the current economic climate, and more than half of those involved in the research had seen clients become insolvent.”
To procrastinate in chasing up your debts is the worst thing a business can do. Constant communication with the customer is encouraged in order to prevent your invoices from staying at the bottom of the pile. Mr Gardner comments: “Such activity as chasing debt is more important than ever because those who sit and quietly wait will soon find themselves dropping to the bottom of the list when it comes to payment.”
The insolvency and debt recovery specialist Mr Gardner concludes by reinforcing the importance of expert legal advice in matters such as debt recovery: “It is vital that any legal action is considered fully, because, while county court is a very good way of recovering outstanding fees, it is only worthwhile if you win. Working with a qualified, specialist lawyer who deals with debt recovery and insolvency can help to ensure that the case is winnable and that everything is in place for a successful recovery.”
Expert legal advice is vital in matters of insolvency and debt recovery in order for a business to stave off insolvency. Latimer Hinks Solicitors, based in Darlington, specialise in offering North East businesses legal advice on insolvency and debt recovery issues. For more information please see the following link http://www.latimerhinks.co.uk/
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