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Don’t Let Your Debtors Lock You Down! November 2020 Update

Andrew Koffman

10 tips for reviewing and implementing your credit control procedures: Revisited

The impact of COVID-19 on businesses continues to be severe, as recent statistics show.

In the UK as a whole the most recent ONS statistics show that nearly 30% of businesses, which have not closed permanently, continue to regard themselves as at moderate or severe risk of insolvency.

 

Here in the northwest, late-paying customers were an increasing concern for over 25% of businesses taking part in the ICAEW Business Confidence Monitor (BCM), published this week.  This was based on research carried out before the latest national lockdown.

Pressure on businesses will no doubt continue but there are steps that can be taken to improve your cash position by good housekeeping.  The Government continues to promote forbearance between businesses at present but this should not require you to take an excessively lenient approach to recovering debts that are rightfully due.

The following guidance is a fully updated version of a checklist for business owners that we posted during the first lockdown:

Review your book of debtors

  1. Consider which debts you should prioritise. Which of your customers are most vulnerable and why?
  1. There is no need to be lenient unless non-payment is directly related to COVID-19. Even then there may be steps you can take.  Look out for customers who use COVID-19 as a pretext without any proper basis.
  1. You are expected to act reasonably but so are your customers.
  1. As a general rule the earlier you tackle your debtor the greater the prospect of recovery. You can do this in a stepped way, starting very gently but so as to identify any potential issues early – particularly given that the courts are operating more slowly than usual.
  1. Consider the importance (if any) of preserving the relationship, both to you and to your debtor.

 Plan Ahead

  1. Develop a strategy for recovering each debt. One size may not fit all.
  1. Find out what you can about the financial position of the companies/individuals who owe you money. How up to date is the available information?

Pre-Court Procedures

  1. Speak to your debtors during the ongoing crisis and be sure to keep notes from your conversations. Consider sending emails to confirm your conversations.
  1. Identify (with your lawyers’ help if need be) any legal issues, e.g. is the customer that you invoice the same one that opened the account, and have they accepted your terms of business?
  1. Consider (again with your lawyers) how long it will take to issue and serve any court proceedings and obtain and enforce judgment. You may need to factor in any “pre-action protocol” letters which should be sent where the debtor is an individual, whether a business person or a consumer.  Is there anything you can do to put yourself at the head of the queue, if there is one?

Contact Us

Should you have any issues around debt collection at the moment please get in contact with Andrew or Mike:

Andrew Koffman, Partner

t: 0161 827 4604

e: andrew.koffman@bermans.co.uk

 

Mike Smeaton, Senior Associate

t: 0151 224 0513

e: michael.smeaton@bermans.co.uk

 

 

 

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