Careful with the cashflow.

Cashflow at risk as businesses focus on chasing larger debts

Published:  21 April, 2010

GUILDFORD: Credit managers let out the reins and relaxed their commercial debt management strategies in Q1 2010, in a sign that business confidence is returning, according to debt recovery firm, Lovetts.

In Q1 2010, the average commercial debt being chased for payment rose by almost 40% compared to Q4 2009 suggesting that businesses are prioritising bigger and more significant debts. In addition, the length of time it is taking for companies to chase payments has increased. 

Late payers are getting an extra five days to pay, compared to the previous Quarter, before an LBA is issued and an extra seven days after the LBA has been issued, before a claim is made.

However, Lovetts is warning that this renewed confidence could be short-lived if businesses fail to apply stringent debt management controls across the whole of their business.

Charles Wilson, chairman and managing director of the firm, said: "The cost of issuing a Letter Before Action to chase up payments is extremely low in comparison to the amount of outstanding debt many businesses are facing. 

"Added to this, year-on-year, businesses are now waiting over 25 days longer before issuing an LBA. This delay could be costly, and puts companies at greater risk in what is still an incredibly uncertain economic environment.

"Businesses need to remember that the tough times are far from over, despite the UK officially being out of recession.

"The next 12-18 months will be pivotal for UK businesses and simply pursuing debts in a more effective and timely manner could spell the difference between success and failure." Mr Wilson concluded.

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