How to Spot Bad Debts Before They Ruin Your Business…
Writer’s Bio: Lewis Murawski is the Managing Director of Kahootz Media digital marketing agency. He has been ranking websites on the first page of Google for more than 10 years.
The Carillion conundrum has recently shaken the UK and raised levels of uncertainty for small businesses and individuals. Hundreds and thousands of small businesses have been reliant on Carillion contracts and now face non-payment of invoices and even unemployment or redundancy. This huge company was responsible for (either directly or through sub-contracting) over 30,000 employees and millions of pounds of contracts and construction projects. What will now happen to these contracts as Carillion proceeds with liquidation?
If you are a small business owner who relies on contracts from larger corporations, it is vital that you are aware of the danger signs. You must be able to identify areas of concern and react quickly if you feel the company is about to fold. We have provided a list of some of the main signs to watch out for, together with advice on how you can still receive payment for your work.
What signs should you look for?
Invoice issues / withheld payments
This is one of the major signs that should immediately flag up a warning. If your accounts department is experiencing problems with invoice payments, this could be a sign that the debtor has simply run out of cash. We don’t mean simple late invoice payments – most companies try and delay invoice payments as long as they can. We mean continued non-payment of invoices – if you are simply not receiving any cash at all you may need to take further action.
Lack of communication
A lack of communication is a harder sign to dissect and will depend largely on your relationship with the larger company. You may only communicate infrequently for example. If you do communicate regularly with the other business and they simply shut off all forms of communication, this could be a sign that they are avoiding contact due to internal difficulties. Consider using direct methods of communication such as phone calls, or even visiting their premises to speak face to face with a member of their team – people often struggle to lie when directly confronted.
Lack of commitment to future work
When a company is about to fold, they will usually either cancel their contracts or just simply refrain from taking any new jobs. If you receive regular work from a larger company, and they seem reluctant to provide any future contracts, this could be a sign of trouble. If everything is running smoothly, they should have no objection discussing future projects?
Frequent Staff reshuffling
This is another less than tangible sign, but still, something to consider. During times of trouble, a large company will often bring in new members of staff or reshuffle their workforce. This is done in an attempt to bring in new ideas and try to salvage their business. If you are continually dealing with new contacts then this could be a sign that something is not working as it should, and that the company is experiencing issues.
What can you do to secure your finances?
Now that you understand how to identify the potential dangers signs, you should be aware of what you can do to ensure you get paid!
The simplest process you can undertake is to issue a statutory demand. A statutory demand can be issued to a debtor who owes you money – once delivered, the company has a set number of days to pay their debts, otherwise, you can instigate further processes such as bankruptcy. Consider hiring a process server to deliver the statutory demand to ensure it reaches its intended recipient – from there, you should have a positive change in recovering your debts if you act quickly.