InsightsInsight - Coronavirus, Debt Recovery, Insolvency - POSTED: April 21 2020
Maintaining business cash flow during coronavirus
This article provides guidance for business owners on business-to-business debt and actions to take, which we hope provides clarity in these difficult times.
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Due to the economic uncertainty brought about by the coronavirus pandemic, maintaining business cash flow has never been more important.
While the Government has announced a raft of measures to assist businesses to continue to trade, there are measures that businesses can take themselves to put them in the best position during lockdown and beyond.
Maintaining business cash flow – top tips and answers to common concerns
1. As most businesses are closed, can I still chase payment of overdue invoices to support cash flow?
Yes. Although businesses have closed their offices, most are continuing to trade with their employees working from home. If you have an invoice overdue for payment you should still continue with your normal credit control procedures, but we recommend you do so sensitively. We encourage keeping lines of communication open to establish which clients are truly in difficulty (who you may be able to support by offering terms) and which ones may be using the current pandemic to avoid making payment. You should also take this time to review and manage the current credit limits you afford your clients. This is in order to avoid large debts being incurred at this difficult time. Also carefully consider any new clients who approach you and, where possible, obtain payment up front. Finally, review work already in progress and, where possible, invoice.
2. If payment is not made, can I still issue legal proceedings?
Yes, legal proceedings can still be issued. The court service has closed a number of courts either entirely or to the public, with the court offices only remaining open. Legal proceedings are however issued via the County Court Bulk Centre which remains open. The Bulk Centre receives instructions electronically and issue claims via an automatic process. As the Post Office is still delivering post, claims can still be served. The issue of a claim and the threat of a County Court Judgment may be enough encouragement for a delinquent debtor to make payment. Again, we stress sensitivity at this difficult time and to consider that everybody is suffering due to the pandemic, so would only advise on legal action as a route if all other payment options have been explored.
3. If there is no response to a claim, what can I do from that point?
Should the defendant fail to acknowledge the claim or file a defence to the claim, within 21 days of the claim being produced by the County Court Bulk Centre, then judgment can be requested through the online portal. As with claims, this is an automatic process and the judgment will be produced and posted to the defendant.
4. Once judgment has been obtained, what can I do next?
Ordinarily you would be able to carry out enforcement action. However, at the present, your ability to carry out enforcement action is limited. Bailiffs and High Court Enforcement Officers are not attending debtors’ premises, nor are the courts listing hearings on enforcement actions. You will be able to begin enforcement action, but this won’t be concluded until after the pandemic and matters are back to some form of normality. It is worth noting that the judgment will immediately affect the defendant’s credit records, which will hinder the defendant should they look to obtain credit, so please do bear this in mind. This may encourage the debtor to make contact and arrange payment.
5. What will happen if the defendant files a defence to the claim?
If a claim is defended, then the initial stages will proceed as normal. The court will still be able to serve a copy of the defence and request confirmation on how the claimant wishes to proceed with the action. It is not until the court needs to list a hearing that matters will be affected. At present, only urgent hearings are being carried out so it is likely that any hearing of a new defended action will not take place for many months. That said, the courts are increasingly making use of new technology and can conduct hearings via telephone or video conference, so this may be an option.
6. Is there any other route I can take to force payment?
Although insolvency proceedings should not be used as a collection tool, creditors often do resort to this threat to obtain payment. Creditors are still able to serve a statutory demand on a business so long as the debt owed is due and undisputed. If, following 21 days of service, the debtor has failed to respond then a winding up petition can still be issued. However, as with enforcement, the hearing of a fresh petition will not take place for many months (the current winding up list having been adjourned for three months). Therefore, you can start the process, but it will not be concluded for some time.
More information on the issue of maintaining business cash flow during lockdown is covered in our recent webinar, available to view here.
At Brachers, we continue to work hard for clients to obtain payment of sums rightfully due and owing to them, to protect the lifeblood of their business. We have adapted our working practices during the pandemic and remain ready and able to assist with maintaining cash flow during lockdown. If you have any questions, or want to chat about debt collection practices or guidance during the pandemic, please contact Brachers Debt Recovery team.
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