Almost all businesses will struggle to collect what is owed to them from their customers at some point. In many cases, it’s not just time constraints, or difficulties enforcing credit control that will hold up payments – it’s more than that. A key issue can be the institutionalised practice of late payment, and the knock-on effect that this can have. In many ways, the customer has the control and can exploit their supplier’s fear of pursing bad debts as leverage to delay payment.
As a result, many UK businesses write off millions of pounds every year owed by their customers. The problem is often at its most serious at the start of the year, when trading conditions become tougher, supply chains get stressed and contracts are tested.
Many debts are written off because there was a once-valid concern that the cost, time and risk associated with recovering the money outweighs the financial benefit. This may be the case in a few, individual situations, but it’s not always and now less so than ever before.
The traditional road to debt recovery
So what do businesses do when they find themselves struggling to collect what is owed to them? The traditional option at this point would have been to consider litigation, and also the Courts encourage the companies to negotiate a settlement before beginning legal proceedings. However, as there are no fixed time limits for negotiations to conclude, and defendants are often incentivised to delay the financial outcome, the impact on any business can be considerable, and for a struggling or small/medium sized business, the effect can be disastrous.
A major concern when going down the litigation route is cost. The traditional law firm model is to typically bill based on the number of hours worked - so the longer a case drags on, the more it costs. Also, typically the business will need to make an upfront payment before litigation begins to cover the court fee to issue the claim form (this can be as much as £10,000), as well as fees for the barrister and any expert witnesses required. There’s little doubt that this current system may discourage SMEs from taking legal action.
But there is another way..
There is Escalate.
Escalate is a proven process which includes a collaboration between accountants, lawyers and corporate recovery specialists, where fees are known from the outset and are capped. It is an award-winning collaboration, designed with a cost effective and speedy debt recovery in mind.
Escalate charges a fixed percentage (30%) of the damages that are recovered, and that fee is not paid unless you win your case. All costs are included in the fee - there are no upfront costs (such as court fees, expert witness and barrister fees to pay). In addition, a built-in insurance policy means that a business would never have to pick up any adverse costs if the case was lost.
Escalate targets a settlement inside three months – which compares to the 18-month duration of a typical court case under a traditional litigation process.
Escalate is not only for small businesses, it can help recover debts incurred by all entities.
I didn’t know about this before – so what about debts I have already written off?
If you have already suffered financial losses, don’t automatically assume the costs of recovery outweigh the benefits, and that its too late to recover the non-payment. Escalate may be able to help if your debt up to two years old, depending on the circumstances.
If you are in this position, or any of the above resonates with you in any way, take action and get in touch.