Firms in hot pursuit of bad debt
THE volume of bad debt being pursued for payment has risen to unprecedented levels, according to research by law firm Lovetts.
A survey of claims taken through the court process by the firm on behalf of clients in quarter one was a staggering 97% higher than the same quarter 2008.
The average claim value also soared by 60%. Of the claims, around 35% were for late payment interest and/or compensation.
Lovetts said it had also seen a 58% rise in the levels of debt being chased through Letters Before Action (LBAs) with the average value increasing by 20% year-on-year.
The firm said that the findings strongly suggest that in the current economic climate, businesses have become much more risk averse, taking action much sooner on arrears they may previously have allowed to accumulate to higher levels.
Earlier this month, Lovetts uncovered the fact that businesses are ‘going legal’ 39 days sooner than a year ago on unpaid invoices.
Charles Wilson, chairman and managing director of Lovetts, said: “The previous attitude towards frequent late payers may have been accepting and forgiving but the current tough climate is pushing businesses to press for payment on time in order to protect themselves.
“Our figures certainly suggest that British businesses are determined not to be victims of bad debt and will employ all the tactics available to get paid including pursuing debt through the courts.”
He added: “In this economic climate businesses need to ensure they are tackling late payment and bad debt head on. For small businesses in particular it can be a matter of survival or failure.”
