According to findings of a lively round table discussion for credit professionals held at the Centre for Policy Studies in London small firms are still struggling to recover commercial debts. The round table was part of an initiative sponsored by Else Solicitors to understand the biggest financial challenges facing large corporates and small businesses alike.
The well-attended event attracted companies ranging from BP, Siemens, 20th Century Fox and French Connection to Mazars UK, Hanson UK and Beyond Funding.
The discussion inevitably focused on cashflow because problems associated with cashflow are usually due to the late payments that plague most businesses.
The discussion recognised that although The Government introduced the Late Payment Initiative in March 2013 to help relive this pandemic problem, small firms still struggle to recover commercial debts as they do not want to risk their business relationship with the buyer. The attendees debated practical solutions as to how small businesses can recover commercial debts.
Suggestions for small businesses included updating their Terms and Conditions, outsourcing their credit control and getting paid in a different way, e.g. monthly by direct debit using new technology solutions like GoCardless.
Those taking part in the debate agreed that the simplest and most effective solution for many small businesses is to have a trusted and experienced commercial partner to manage their credit control and debt collection to avoid debts becoming over due.
Laura Charles, Head of Debt Recovery at Else Solicitors said: “Most debts can be recovered using a pre-legal process but you must know your client. You need to know their correct name and address as well as knowing how they are trading, for example as a sole trader, partnership or a limited company.”
Chris Else, Managing Partner of Else Solicitors, concluded “A Letter Before Action is the last letter you send before legal action is started. Else has a debt collection success rate of 95% using just a Letter Before Action. We also help many SMEs with their credit control and we are also supporting the West Midlands Chambers of Commerce with their “Pay in 30 Days” initiative.”
The Late Payment Initiative requires that debtors to pay interest and reasonable recovery costs if they do not pay for your goods or services on time. Yet, many SMEs remain reluctant to chase payment, claim interest, or refer the buyer to Court for breaking the terms of their agreement.