Small businesses are being encouraged to introduce more effective debt collection procedures, as new figures suggest a 56% increase in company liquidations since last year.
Debt recovery law firms are reporting an unprecedented jump in the volume of bad debt being chased. One such firm, Lovetts, claims pursuance of bad debt is up 97% since the first quarter of 2008.
Introducing basic measures, such as internal training techniques with in-house credit teams, can save businesses a fortune in time and unrecovered debt, according to Martin Hughes of Spratt Endicott Solicitors.
“Worryingly, many in-house credit teams do not have the necessary awareness and understanding of their terms and conditions of trading, and are therefore not in a confident position to recover, in the best way possibly, the debts that are owed to them,” Hughes commented. “The knock on effect of this is that the processes are lengthened, recovery rates are reduced, and debts are left to build.”
The average bad debt claim is up by 60%, and of these claims, 37.4% included claims for late payment interest and/or compensation.
These figures suggest businesses are chasing outstanding payments as well as longer term arrears.
Charles Wilson, chairman and managing director of Lovetts, said: “The previous attitude towards frequent late payers may have been accepting and forgiving, but in this economic climate businesses need to ensure they are tackling late payment and debt head on. For small businesses in particular it can be a matter of survival or failure.”
© Crimson Business Ltd, 2009
