North West law firm, SAS Daniels LLP, is warning businesses of the ‘debt domino effect’ as it has been reported that late payment by customers for goods and services is a primary factor in up to 20% of insolvencies.
According to figures from R3, the association of business recovery professionals, one-in-five corporate insolvencies are down to late payments and 47% of corporate insolvency practitioners had seen at least one instance of late payment being a major factor in a business’ failure in the last year.
In addition, recently The Daily Telegraph reported that almost 1,300 retailers were declared insolvent during 2013, an increase of 12% on the previous year.
SAS Daniels LLP, specialising in dispute resolution, is advising businesses in Cheshire to start the process of recouping debt by conducting due diligence in relation to new clients before supplying goods or services.
Paul Formby, Insolvency and Corporate Recovery Associate at the firm, explains: “This may seem obvious, but when looking a bad debt which has arisen, with the benefit of hindsight, it is usually obvious and sensible precautions which have been overlooked.
“The phrase ‘cash is king’ may be a well-worn cliché, but it has never been truer than during the current recession when access to funding from traditional sources has been so difficult. It’s easy to see that the insolvency of a company or customers’ failure to pay on time can cause a ripple effect by putting cash flow under pressure – leading to delays in payments the business owner is due to make.”
Therefore, SAS Daniels is urging Cheshire businesses to act now and avoid becoming a national statistic.
“The key to protecting yourself and your business from the potential impact of insolvency is sensible financial management, taking early action in relation to bad debts or late payers, and seeking legal advice from an insolvency professional,” concludes Mr Formby.