Escalate co-founder Nick Harvey recently took part in a ‘Toolkit for Tough Times’ webinar organised by specialist business lending platform and Escalate partner firm Capitalise. 

During the webinar, Nick provided invaluable advice to SMEs that want to improve their cash-flow during the current Covid-19 pandemic.

We’ve summarised the key points of Nick’s advice below, and also included the video extract from the webinar:

 

The legal market is in a state of flux

The legal market is caught up in a delicate balancing act at the moment, between individuals and companies who have legitimate pre-existing claims to pursue, and otherwise healthy, viable businesses that are now having short term cashflow problems and liquidity issues. 

The government have responded quickly to this challenge through a range of new measures. Some of the key changes being introduced include a 90 day moratorium on creditors being able to present petitions against businesses, relaxations or extensions on the rules against validation orders, and more protection for directors.

The real battleground for lawyers will be where a company has hit the buffers and can demonstrate it is primarily the result of the fallout from Covid-19. The courts are likely to be supportive and more lenient in such situations. On the other hand, cases involving a pre-existing state of insolvency are likely to treated in much the same way as before, albeit there will be additional delays and challenges. 

Lawyers and courts will be working hard to distinguish between those two scenarios of ‘won’t pay a debt’ versus ‘can’t pay due to the turmoil caused by Coronavirus’.

 

Courts remain open, but on a restricted basis 

There will be inevitable delays, but some courts are still open and working on a triage system for emergency cases, holding telephone hearings where possible.

One potential challenge with the current situation is that every business is being given ‘a comfort blanket’, which can create a risk of inertia. It’s the perfect opportunity for debtors to kick the can down the road and put off a problematic debt that’s owed, since everyone is being given more time and breathing space.

Escalate’s message is that enforcement is still possible – ADR (Alternative Dispute Resolution) is still happening, and online Zoom mediation is taking place. Once the dust has settled, lawyers will be working hard to show that debts existed even pre Covid-19.

 

Cash-flow was a big problem even before Coronavirus

British SMEs had £131 billion tied up in late payments before Coronavirus was even on the horizon, according to research by accounting software provider Xero. The issue of late payment will unfortunately be exacerbated as a result of Covid-19, even with the proposed cash injections being provided by the government.

More recent research by the British Chambers of Commerce, which is running a weekly Coronavirus Business Impact Tracker, revealed that three weeks into the crisis, 59% of firms have three months or less in cashflow reserves. A worrying 6% of firms have already run out of cash.

 

How can finance teams and accountants help right now?

Finance teams and accountants have a key role in this scenario, especially if a case ends up in court and accounts need to be dissected to show a pre-existing cashflow issue. Taking the opportunity right now to do some accounts housekeeping and making sure that houses are in order, could be invaluable further down the line. 

Looking at outstanding debts, chasing up late payers and overdue invoices, and communicating in a reasonable way will remove some avoidable delays. If there are wait times in the court process, your business will be ahead of the game if you do the groundwork now. Being pro-active about this is still within your control – those who shout the loudest sometimes get paid first.

 

How can Escalate help?

As outlined in a second follow-up Q&A based webinar with Capitalise, Escalate operates in three core areas – debt recovery, dispute resolution and insolvency. The one common denominator across all of the areas is that, when we take on a case, we’re investing our money into it and have confidence in winning that case. 

The defendant in each case is made aware from the start that our client is fully funded all the way to the High Court and therefore bears no personal risk. This in turn puts pressure on them to come to the negotiating table much earlier on in the process. As a result, we have an excellent success rate. Escalate is a unique, contingent solution, and there’s no other solution like it within the commercial dispute market.

If your business has been affected by any of the issues raised, or if you need some advice on tackling a commercial dispute or late payment, please get in touch with us or one of our partner firms. 

 

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CONTACT US

Contact Us to find out more about how Escalate can help your business.

Our registered address:
Exchange Station, Tithebarn Street, Liverpool,
L2 2QP

Escalate Law Limited
Company No: 10381993

The issue of late payments and other unresolved commercial disputes is rarely out of the news at the moment.  And for good reason.

Accounting software provider Xero estimates that SMEs have £131 billion tied up in late payments, while Pay.UK revealed that SMEs spend £4.4 billion each year collecting the money they are owed. Our latest survey paints a similar picture: we found that 96% of SMEs have experienced a bad debt in the past 12 months, with 60% percent stating that the late payments they experience are a serious issue for them; 42% believe that late payments put their business’ future at risk.

So the problem is well documented.

But what about the solutions? How can we start to drastically bring these figures down?

At Escalate, our focus is all about resolving late payments, bad debts and commercial disputes.  That’s why we’re helping SMEs to recover £100 million to SMEs which would have previously been written off.  So here is our advice on what to do if you face a late payment or bad debt:

Do your research
Get to know your client and invest some time in due diligence, whether that involves asking for references, undertaking a credit check or reviewing the client’s accounts.

Make your terms clear 
Agree expectations from the start. Many disputes arise from the fact that the parties involved did not take time to discuss their expectations at the start of the process. Clearly state your payment terms and other important points up front and avoid leaving any room for doubt later on.

Document as much as possible 
Having a paper trail of important decisions can act as a reminder of the agreements made, providing evidence to bring both sides back on track. Comprehensive paperwork is also likely to help in a court case.

Address issues early 
The old adage that ‘a stitch in time saves nine’ applies here. A potentially tricky conversation early on can prevent a problem from growing in a complex legal case that will cost everyone time and money.

Understand the background 
Talk to the client to better understand the reasons for the issue. Building a relationship with the client may also provide them with an added incentive to prioritise your concerns.

Be firm but fair 
Your business is important to you, so nobody expects you to give in at the first sign of a disagreement. But don’t let your emotions cloud your judgements. Don’t make things personal. Step back and use an impartial observer, if needed.

Get an expert involved 
If you feel that the other party is unlikely to change its mind, it may be time for expert advice. This is exactly why we created Escalate. If you have already suffered financial losses, don’t automatically assume the costs of recovery outweigh the benefits.

If your business is struggling with bad debts, late payments or another type of commercial dispute, remember that there are solutions and writing-off should no longer be necessary.  Please get in touch…

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UHY Hacker Young joins Escalate dispute resolution platform

UHY Hacker Young in the North West, one of the region’s leading accountancy firms, has become the...

CONTACT US

Contact Us to find out more about how Escalate can help your business.

Our registered address:
Exchange Station, Tithebarn Street, Liverpool,
L2 2QP

Escalate Law Limited
Company No: 10381993