Collecting Business Debt before Cash Flow Crisis

Posted on October 4, 2022

Cash flow for North West businesses is an ongoing battle, but with mounting pressures and increased costs businesses could be facing a bleak midwinter.

To keep the money coming in SMEs should consider appointing specialist commercial debt recovery solicitors to try and prevent their businesses from running into difficulties and making sure they are fit for trading well into 2023.

Outstanding debt can cause huge cash flow problems and threaten the viability of a business. At Pearson Solicitors our key guidance is to “take action”! Don’t just ignore the problems and hope they resolve themselves: the chances are they will not!

“In our experience, the sooner you act, the more chance you have of recovering payment, getting a payment plan in action, or sorting out your debts satisfactorily,” says Commercial Litigation Lawyer, Leigh Sunter.

“It’s a tough time out there, whatever problems you have you can bet your suppliers and customers are also facing the same issues. Businesses have had to deal with a pandemic, now they have inflation and mounting bills, so I am sure we will see commercial debt becoming a big issue as costs continue to rise,” she adds

Concerns over Business Debt

According to the Office for National Statistics (ONS) spring report 26% of businesses note price inflation as their main concern and 20% energy prices, but as energy caps lift that % will of course rise as businesses worry about energy bills.

Around 22% also reported that they had experienced global supply chain disruption. The manufacturing industry reported having experienced a high percentage of global supply chain disruption at 42%. All these factors could have an impact on paying bills to suppliers.

"All sectors of our regional economy are being squeezed and business owners will need to be proactive when it comes to boosting their cashflow and collecting commercial debts in,” advises Leigh.

Help with Business Debt

“We have years of experience working with businesses on how best to handle debt recovery and have in some cases turned things around for business owners, it pays to get the experts when it comes to chasing commercial debt as we know the many steps needed in securing that payment.” adds Leigh

There are a variety of ways Pearson can help with business debt:

write a “letter before action” on your behalf to the debtor
if the letter before action does not result in payment, we can start court proceedings in the Small Claims Court
where the debtor is unable to pay their debts as they fall due, we could start winding up proceedings or bankruptcy proceedings (as appropriate)

Our debt recovery department uses a proven combination of letters, telephone calls, court proceedings and common sense to recover payment from your debtors. In many cases, a well drafted solicitor’s “letter before action” to the debtor is that extra push needed and will bring about immediate payment. It is a simple and cost effective solution. If however, a debt becomes contested, then we can advise businesses on the various options available.

Challenges with Debt Recovery

Debt recovery can also give rise to more difficult issues. For example:

the debtor might dispute that all or any of the payment is due;
the debtor might be complaining about the quality of the goods or services you have supplied; or,
you might not feel able to take action say, for example, if the debtor is a personal friend or an important customer you don’t want to irritate.

“Every day matters when it comes to debt and so I would advise business owners to act now to improve their cashflow. There are a few things creditors can do themselves to speed up the process before appointing a specialist commercial debt recovery solicitor; be certain you have correctly identified the debtor, be precise about who you have invoiced – is it an individual, company or limited liability partnership, so you know exactly who you are chasing for payment,” advises Leigh

“Post pandemic, businesses were buoyed up by Government intervention, but now payment holidays have ended and we’re all facing a cost-of-living crisis there will potentially be reduced access to credit and this could have an impact on debt as businesses have to face their true financial future.”

Contact Us

For advice on any issue regarding commercial debt please contact our team on 0161 785 3500 or enquiries@pearsonlegal.co.uk

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.