23 July 2019
How to avoid bad debts
According to the latest government figures, the number of personal insolvencies reached an 8 year high of 115,299 in 2018. The Insolvency Service reported a slight fall in the first quarter of 2019, however the number of individual insolvencies was still at the second highest level since 2010. In the last 12 months 1 in 388 adults were subject to formal insolvency procedure.
These figures contained in the government’s online publication, Individual Insolvency Statistics Q1 January to March 2019, also shows that Individual Voluntary Arrangements (IVAs) are on the rise, despite a fall from a record high last quarter. An IVA is a formal agreement between a debtor and their creditors whereby the debtor agrees to make affordable payments over a fixed time period of five or six years. At the end of an IVA period, any remaining unsecured debt can be written off.
This report highlights the importance of carrying out sufficient due diligence on both suppliers and customers at the outset of a business relationship who are afforded a line of credit. Online credit checks help to reduce the risk of late payments and bad debts. It is also important to consider updating your due diligence periodically, so as to check for any significant changes to a customer or supplier’s financial position. This helps to act promptly on any late payments.
Effectively managing late or non-payment of debts is key to reducing the risk of overdue payments turning into bad debts. If it is a business debt, maintaining your business’ reputation is also an important commodity and goes hand in hand with debt recovery. Early intervention can help to avoid resorting to legal options to recover your debts.