Pictured above: Marcus Brown
A new report says many companies are now technically insolvent
and could be forced out of business by an increase in interest
rates. Marcus Brown says the report emphasises the need for firms
to get tougher over debt collection to avoid being dragged
down.
The insolvency trade body R3 surveyed 500 companies when
compiling its Business Distress Index.
It found that one in six businesses find it difficult to pay
invoices on time.
R3 President Steven Law said: "The increase in businesses
struggling to pay bills on time is worrying as this is the
technical definition of insolvency.
"This coupled with an increase in the number of businesses using
the maximum overdraft facility, which stands at 1 in 5, suggests
that many businesses are running on empty. For many, an increase in
interest rates could push them over the edge."
The figures are not only alarming for the businesses involved
but also for those who trade with them.
They emphasise the need to take action to recover unpaid debts
as soon as problems arise. If you delay, you could see debtors
going out of business before they pay your invoice.
Even at the height of the recession, many firms were reluctant
to get tough over late invoice payments for fear of damaging their
relationship with the customer - even though that customer was
racking up significant debts.
Many firms got their fingers burnt that way and are now far less
shy about taking legal action as soon as debts start to mount up
and polite requests for payment are ignored.
A simple letter from a solicitor is often enough to ensure
payment.
The realisation that you are now taking the matter seriously
means that debtors usually take notice immediately and settle very
quickly.
However, if the debtor still doesn't pay after sending a
solicitors letter then a firm can take Court action to recover the
debt, interest on the debt and some of the legal costs.
Firms should not be afraid to pursue these options. It's only
natural to want to maintain a good relationship with a customer but
at the same time, a customer who doesn't pay is not worth
keeping.
For more information please contact Marcus Brown directly on
0115 988 6728 or email mbrown@andersonssolicitors.co.uk.