New research has found that one in three (32 per cent) businesses is reluctant to chase bad debt.
A survey of 397 bad small and medium-sized enterprises (SMEs) also found that of those affected by bad debt, 81 per cent were reluctant to chase debtors because they found the process uncomfortable while 19 per cent were afraid of antagonising customers. Only 15 per cent of SMEs surveyed used late payment regulations to charge customers extra for late payment.
A quarter (24 per cent) of SMEs surveyed thought the late payments position had deteriorated over the last two years, compared with 17 per cent that thought it had improved.
Despite their unwillingness to pursue late payers, most small businesses recognised that taking action would deliver results. Almost a third (30 per cent) believed they could recover more debt if they were more proactive.
Yet three-quarters of firms (77 per cent) had no person or a procedure in place for chasing bad debt and a significant majority had no established escalation process for late payments. The research was produced by automated credit control service, Satago.
While the research suggests businesses could reduce bad debts by being more proactive in their approach, there will be times when legal intervention is necessary to recover money owed.
Palmers’ Debt and Insolvency team specialises in commercial debt litigation and will be able to assist creditors in deciding which procedure is most likely to result in the recovery of money owed.
For example, our debt and insolvency services include assisting clients in issuing statutory demands, which can be used to claim payment of a debt from an individual or company. If the debt is not paid, or there is no agreement to pay, within 21 days, whoever issues the statutory demand can then initiate the winding up of a limited company if the amount owed is more than £750.
We can also advise on issues such as updating terms and conditions of business to include charging interest on debts or amending them to take advantage of the Late Payment of Commercial Debts Act 1998.
The Act enables interest to be claimed on debts owed by other businesses and public sector organisations, for up to six years after a late payment has been received. If business terms and conditions do include an interest rate chargeable on late payments, this will take precedence over the interest rate set out in the Act, so we can update these to take advantage of the rate in the Act, if this is better.
We understand that in pursuing debts, creditors want to ensure the costs involved do not outweigh the eventual return and we offer a cost-efficient fixed fee appointment of up to one hour at a cost of £100 + VAT to examine the case and explore the options. For more information, please contact Andrew Skinner.