Three Ways to Reduce Your Debt and Improve Your Cash Flow
Research shows that when it comes to debt, small and medium-sized businesses (SMEs) are hit the hardest. Small bills were paid the last (£100 to £1,000) whilst bills over £20k were the first to be paid. If you are a business owner waiting to be paid, these debts may be compromising your profit and the amount of money available to invest back into your business to help it grow. Over time debt also affects business relationships, can disrupt the supply chain and have a negative impact on business reputation built up over time.
Late Payments and the Damaging ‘Daisy-Chain’ Effect
Late payments can have a knock-on effect slowing cash flow, leading to debt which ultimately can mean your business is unable to pay its own suppliers. Damage may be long lasting and can happen on two levels:
- Between you, the business owner, and your regular suppliers.
- Attracting negative reviews which might affect how people view your business (and whether they want to do support your enterprise).
Three Ways to Help You Recover Debt
- Check and update your paperwork. State your payment terms on invoices, statements and within terms of business. In writing, state your intention to pursue non-payment if these terms are exceeded.
Ensure your terms of business include a provision for interest. The Late Payment of Commercial Debts (Interest) Act 1998 applies and was set up to deter late payment of debts by compensating creditors. If you have supplied commercial goods and services to a buyer for business purposes, you can claim for interest and compensation for unpaid invoices (the contract is not governed by a consumer credit agreement). If you reach this point, you can send a Late Payment Demand.
- Still unable to recover the money? At this point you can send a Debt Chasing Letter.
- If you have tried 1 and 2 and have still not received payment, you can take legal action. When you have tried different ways to recover the debt and have been unsuccessful, contact an experienced professional to collect the debt on your behalf. This action needs to be quick and efficient – making it affordable for you. Make sure you choose a reputable business which has a proven track record of recovering business debts. Ensure the company takes time to understand you and your business. A County Court Judgement (CCJ) orders the money to be paid (this route will cost you). And the very last resort is to get bailiffs involved.
For a free, no-obligation discussion with a professional contact Alex, a commercial debt recovery expert at Hillyer McKeown.
For more information, please visit https://www.hillyermckeown.co.uk/staff/alex-irwin/