Is now really the time to chase debts?

As many businesses edge towards operating as they did pre-pandemic, the commercial battle scars are now in full view. Sadly, some companies have not survived the last few months of restrictions. And even for those that have weathered the storm so far, the financial future looks extremely uncertain.

With the lay of the land as it is, businesses are having to make difficult decisions involving debtors. Over the last few weeks all sorts of organisations have queried as how to deal with their unpaid invoices -should they chase these debts, when they suspect the debtors are in a precarious financial situation?

Of course, every situation is different. In most, however, our advice is to address the debt and not let it slide under the radar. Few companies can afford to allow debts to linger, not least because pressures further up the commercial chain do not let up easily.

So, there is no reason in principle why a business should not pursue debts. However, consider very carefully how best to do that. A company that takes an aggressive stance from the get-go risks ruining its relationship with the client. It may also risk harming its reputation by not being seen to cut a struggling debtor some slack when it can afford to do so.

The key, then, is to judge the situation well. Is this an uncharacteristic debt; does the company that owes money usually pay on time? Is this a long-term or otherwise significant client? Is there any other reason to not chase this debt as vigorously as you might otherwise?

Those are all important considerations. And, ultimately, a business has to protect its own position. The starting point should be to communicate with the debtor. Find out why the invoices haven’t been paid, and see if you can come to some agreement that sets out a reasonable timescale for payment. Listen out for any alarm bells that suggest the debtor may be in serious financial trouble. If it seems that the company may become insolvent, you should take urgent legal advice on how best to increase your chance of recovering the debt you are owed.

In any event, talking to your debt recovery solicitor at an early stage should help you take the best course of action.

For advice on any aspect of debt recovery, contact Rachel Barr on 01264 353411 or email info@bsandi.co.uk. We will be happy to help.