Debt Collection

Wednesday, 27 January 2016 13:37

Two Simple Steps to Avoid Bad Debts

Dealing with an Insolvent client can kill a profitable business. If your client becomes insolvent it will have a significant knock-on effect, that will impact on your company cashflow, leaving you as a creditor with unpaid invoices that will likely never be paid.

In 2015, more than 100,000 UK businesses found themselves as creditors to an insolvent business, and many will have found their cash flow at serious risk as a result. Any business, irrespective of size, is at risk if their client becomes insolvent but for freelancers and micro-businesses these risks are magnified.

It doesn't seem like rocket science to suggest that if a customer goes bust, you might want to stop supplying them; in fact, if you're doing your credit control properly, you'll probably want to restrict their account long before they publicly declare insolvency.

Under new government plans, due to come into force this October, you might find you are banned from taking such action, once your customer's financial woes are made public knowledge.

Wednesday, 26 August 2015 14:43

Bad Debt - Prevention is Better Than Cure

When it comes to avoiding bad debt the old adage "prevention is better than cure" is a very useful rule to follow. As we tell any business owner that will listen, it is absolutely imperative that before you extend a customer credit you answer the following questions:

  • Does this customer have the financial means to pay?
  • Are they prepared to pay promptly or at all?

The UK's small businesses are facing even longer overdue invoices than at the worst point of the recession, according to figures from ABFA.

In a report published earlier this month, the Asset Based Finance Association revealed that, in 2009 when the recession peaked, firms with turnover of less than £1 million per year were waiting on average 61 days for invoices to be paid.

Hardly a month goes by without a new government or industry scheme aimed at preventing late payment - since the EU Late Payment Directive was introduced, we've seen the voluntary Prompt Payment Code, proposals to name and shame poor performers on a public database, the Supply Chain Finance Scheme to raise funds against outstanding invoices, and several suggestions of new conciliation schemes.

The smallest firms in the UK are being paid late, in some cases by over a year, due to a lack of urgency and a sense of awkwardness about chasing clients for payment, new figures suggest.

A survey carried out by online accounts software provider FreeAgent revealed that just one in seven micro-businesses that issue invoices have never had to deal with an instance of late payment.

Snoop Dogg has issued a legal claim against brewers Pabst for monies he believes are owed after his licensing deal went sour according to an article on the Associated Press.  Snoop, whos real name is Calvin Broadus Jr, signed a three year deal with Pabst in 2011 to be the face of their new Blast drink and received a cool $250,000 down payment.  With a further $20,000 due for every tenth mention of the beer on social media, at his concerts or during TV appearances.

The granting of royal assent to the Small Business, Enterprise and Employment Act 2015 should be good news for creditors, particularly those who are left owed money by a business customer who has gone into corporate insolvency.

That is because there are several measures included in the legislation that should leave more money in the pot to pay creditors what they are owed, even after the administrators take out their fee; and there may also be the option to pursue a company's former directors personally for redress.

One of the biggest obstacles to recovering an outstanding debt has always been if a company ceases trading - this is basically a dead end, as once the company ceases to exist, it's impossible to continue chasing the individuals who ran it. Or is it?

Under the terms of the Small Business, Enterprise and Employment Act 2015, which received royal assent on March 26th 2015, new rules will apply to disqualified directors, and particularly to any losses incurred by creditors due to director misconduct.

Last week, the Small Business, Enterprise and Employment Act 2015 gained royal assent, meaning broadly speaking, the various measures that have already been outlined by BIS, the Insolvency Service and other government departments should be brought into law without any major changes.

What does this mean for creditors? Actually there are some broad sweeping measures, and some more specific ones, which should combine to tip the balance more fairly in the direction of creditors.

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