Managing and dealing with your cash flow is very important for anyone in business, but a failure to manage bad debts may be highly damaging to a small business. As a small business, you must be always mindful of this situation, especially in the current economic climate.
Unfortunately in the current economic climate, bad debts and commercial disputes become all too common. Most people are quick to rush off to see a debt collector, or a solicitor, however the problem with taking legal action is that doing so may be costly and time consuming. Before taking such a path, you should review and assess:
- If you have a clear, straightforward, and strong case
- If you do not have a clear case, if you need to obtain legal advice to consider your position
- If the matter can be negotiated and resolved
- If an lower value offer is made, is it reasonable to accept it rather than to start legal proceedings
Court isn’t necessarily the first place to go to resolve a dispute. Rather, it should be considered the last place to go. The court system is often, slow, procedural, adversarial in nature, inflexible, and costly. There is also the risk that you may lose the case and be subject to paying the costs of defending the case.
The last thing you have to take into consideration is the capacity of the debtor to pay. There is no point in wasting both time and money taking action and enforcement against a debtor who cannot pay.