Sharp rise in debt claims made in court

Polite request: Companies are urged to keep communicating with firms that owe them money

Resellers are being advised to come up with an effective debt-collection strategy as figures point to a spike in the value of debts being chased through the courts.

Legal firm Lovetts reports that the total value of debt it pursued through the courts on behalf of clients more than doubled in the second quarter on an annual comparison.

Charles Wilson, managing director at Lovetts, stressed that court claims were a “last resort” and that the rise clearly showed that cash-strapped firms are taking an increasingly tough stance on late payers.

“With business failures still on the rise, the willingness to chase late payments could be the cornerstone of their survival,” he said.

However, channel finance experts urged resellers to consider all options before going through the courts.

Nitin Joshi, founder of ChannelMoney, said: “Those who are pursuing debts have an armoury of weapons in debt collection, which ultimately ends with a winding-
up petition through the courts if the customer refuses to pay.

“However, this has to be balanced with the question of whether channel players want to continue trading with these customers in the long term, or whether they will do anything to get their money.”

Henry Ejdelbaum, managing director of ASC Finance for Business, also stressed the dangers of resorting to legal action too quickly.

“Small businesses should use the personal touch and contact business associates directly,” he said.