With the recent government announcement that it may at least be a number of months until the Coronavirus crisis has been contained, it is understandable that businesses are concerned about adverse cashflow as the result of invoices being paid late or not at all.
Cashflow is the lifeblood of any business and in the current economic climate, it is increasingly likely that invoices will not be paid on time or disputed. While there may be many reasons as to why a debtor refuses to pay, managing bad debts and resolving any dispute promptly will undoubtedly help a business’ cashflow in this time of economic uncertainty.
In our experience there are several positive steps which can assist any business:
1. Good communication
This is important for both the financial and reputational standing of a business. Having a regular line of communication with debtors to see if they can’t or won’t pay is an important first step. Picking up the phone and following up with a letter or email is a good way to engage directly with debtors and keep a clear, written record of any delay in payment. From a debtor’s point of view, when cashflow is tight good communication is likely to buy additional time to settle invoices owed. In these challenging times, offers to pay in instalments might be enough to avoid enforcement action being taken.
2. Clear records
Having clear records of the supporting contractual documentation is important. In times like these, commercial disputes that focus on the existence of certain contractual provisions, such as force majeure clauses, are not uncommon. It is good practice to keep and record both the original contract and any subsequent agreements throughout a transaction.
Lastly, clear escalation to potential debt recovery action is crucial. Whether it be a Letter Before Action or a Statutory Demand, identifying, preparing for and executing the most appropriate course of action saves both time and costs. This is particularly important if it is likely that legal proceedings need to be commenced and settlement discussions have either stalled or broken down.
For straightforward, comprehensive advice or to discuss a particular debt recovery matter, please get in touch with our dispute resolution team on 01753 889995 or email email@example.com.