The British business landscape is changing by the day at the moment, as the Coronavirus pandemic plays out across the world. Many companies have swiftly adapted and pivoted their business models and production lines in order to survive, whilst those who were struggling before the crisis are facing worrying times and an increasingly uncertain future.

As we continue to work remotely and keep up to date with the continual issuing of new Government guidance, Escalate have been focusing on trying to help as many SMEs as possible.

Escalate Co-founder Nick Harvey has been busy taking part in several webinars aimed at advising SMEs, the most recent one being with our partner firm Pimento (an independent network of marketing agencies and consultants). We’ve set out Nick’s responses to some of the most commonly asked questions that were sent in by SMEs below:

 

Government changes to winding-up petitions 

Q: We’ve just received a winding up petition from a supplier, but we aren’t in a position to pay the debt right now. Are the debts reactive, or can we ride this one out for a while?

The current environment is all about working out the competing interests between pre-Covid-19 debts, and those companies who have hit the skids as a result of Covid-19.

If you’ve got a winding up petition, changes to the insolvency rules are imminent, which will effectively create a moratorium of 3 months around winding up petitions being presented/progressed. The platform will be there for businesses to kick the can down the road and delay things, but the challenge is really on the lawyers to demonstrate to courts that this was a pre-existing condition, as opposed to the debt having arisen specifically from this mess.

 

Differentiating between pre-existing debt, vs debt incurred as a result of Covid-19

Q: How will courts differentiate between existing debt prior to Covid-19 vs as a result of it, and will these cases be treated differently?

A comfort blanket is being given to companies to sort their affairs out and work through this challenging period, giving them time to come to informal arrangements with creditors or create a (CVA) Company Voluntary Agreement. The end result will be that they either come to an orderly winding up, or come out the other side.

The courts will be looking to try and give forbearance and tolerance to those businesses. For pre-Covid-19 conditions of indebtedness, the courts should not be giving tolerance in those circumstances, and the lawyers will earn their crust by demonstrating the difference such that those debtors trying to exploit the current situation to mask pre-existing indebtedness are prevented from doing so.

Q: Are courts still active and open for business? 

Yes they are – there’s a triage in place to deal with emergency hearings and applications but doors are not closed by any means. There will be administrative delays, but courts are open for business, and are doing all they can to keep things moving – e.g. remote hearings on Zoom for instance.

 

What to do when calls and emails go unanswered 

Q: We are chasing down payment and finding it really hard to get a return on our calls and emails. Many claim to be out of office. What can we do in this situation to get a response? 

Undoubtedly the current circumstances are challenging – there is now a platform for certain debtors to exploit and kick the can down the road.

The key message here is not to give up. Now is the time to get your affairs in order and try to do all that is within your power and control to improve your cashflow.

My advice sounds simplistic, but would be to call at different times, on different numbers, using all contact points available to you. Bear in mind that whilst you might be receiving out of office activated messages, it doesn’t mean the messages aren’t getting through.

You can still instruct a Process Server (an appointed Person who serves Court Orders and legal documents) if necessary; they can still go ahead and serve legal letters.

Above all, start building the story that this is a pre-Covid-19 problem, rather than one that’s been created by the fallout from it. Don’t sit back and fester and think that there’s nothing that can be done about it.

Identify those accounts that are delinquent and start getting communications going backwards and forwards. If you can do that, once your house is in order, if it does reach the court stage you have a better chance of getting ahead of the game and ahead of other creditors.

That old adage of those who jump the highest and shout the loudest get paid first, is invariably true.

 

Client debt that’s on a payment plan 

Q: We have a client debt that’s on a payment plan, but suspect that the business isn’t going to make it. How can we secure our debt?

There are two possible routes here, depending on the specific circumstances such as the size of the debt and if there is a default on the payment plan or not.

If there’s no default, there’s nothing to stop you approaching the debtor and asking them to secure that debt or ask for security to underpin the payment plan – if you don’t ask, you don’t get.

If there is a default, firstly, move quickly. Issue a court claim and get a judgment or charging order behind it for security.

Alternatively, you can go down the road of a winding up petition. Whilst there is a moratorium soon to be in place, the pressure of this might give rise to a voluntary offer of security to secure your debt. Personal or cross company guarantees might also be an option, rather than physical security.

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. 

 

< News & Views

Management Today Award for Escalate Reinforces its Ground-Breaking Role in Supporting UK SMEs

Escalate, the commercial dispute and bad debt resolution service for SMEs, has been named the...

Stephens Scown joins Escalate dispute resolution platform

Renowned South West based law firm Stephens Scown has become the latest professional services firm...

Escalate wins ‘Innovation of the Year’ at the Modern Law Awards

Escalate, the ground breaking dispute and bad debt resolution service, was named 'Innovation of...

Escalate shortlisted for another major award

Escalate, the ground breaking dispute and bad debt resolution service, has been shortlisted in the...

Escalate nets a hat-trick at the Modern Law Awards

Escalate has been shortlisted in three categories at the Modern Law Awards. The business has been...

Escalate is hiring

Escalate, the multi-award-winning dispute resolution business, is recruiting for Business Managers...

Escalate nominated for ‘New Business of the Year’

Escalate has been shortlisted for ‘New business of the year’ at the Lloyds Bank National Business...

Norfolk Chambers partners with Escalate & local firms to launch new member service

Norfolk Chambers of Commerce have partnered with regional accountancy and law firms Price Bailey...

Ashtons Legal joins Escalate dispute resolution platform 

Award-winning East Anglian law firm Ashtons Legal has become the latest leading professional...

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

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…

< News & Views

Management Today Award for Escalate Reinforces its Ground-Breaking Role in Supporting UK SMEs

Escalate, the commercial dispute and bad debt resolution service for SMEs, has been named the...

Stephens Scown joins Escalate dispute resolution platform

Renowned South West based law firm Stephens Scown has become the latest professional services firm...

Escalate wins ‘Innovation of the Year’ at the Modern Law Awards

Escalate, the ground breaking dispute and bad debt resolution service, was named 'Innovation of...

Escalate shortlisted for another major award

Escalate, the ground breaking dispute and bad debt resolution service, has been shortlisted in the...

Escalate nets a hat-trick at the Modern Law Awards

Escalate has been shortlisted in three categories at the Modern Law Awards. The business has been...

Escalate is hiring

Escalate, the multi-award-winning dispute resolution business, is recruiting for Business Managers...

Escalate nominated for ‘New Business of the Year’

Escalate has been shortlisted for ‘New business of the year’ at the Lloyds Bank National Business...

Norfolk Chambers partners with Escalate & local firms to launch new member service

Norfolk Chambers of Commerce have partnered with regional accountancy and law firms Price Bailey...

Ashtons Legal joins Escalate dispute resolution platform 

Award-winning East Anglian law firm Ashtons Legal has become the latest leading professional...

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