Partner Article

Getting money owed to get harder

Businesses in Coventry and Warwickshire owed money by customers will find it harder to get their hands on that cash later this year.

The Government confirmed before the election its plan to introduce new protocols for debt claims from October 1 and, according to a local expert, the changes will mean delays on firms getting their money.

The changes apply to any business – including public bodies – that are seeking payment of a debt from an individual or sole trader but they won’t affect claims against limited companies, partnerships or LLPs.

The pre-action protocol is aimed at encouraging parties to exchange information at an early stage, to consider Alternative Dispute Resolution and to encourage parties to act reasonably and proportionately.

The changes will require much more information to be provided before court proceedings can be issued and will give debtors 30 days to respond rather than the current seven days.

Larry Coltman, of Coltman Warner Cranston and a past president of the Coventry and Warwickshire Chamber of Commerce, said failure to follow the protocol could mean an award against the creditor.

He said: “Firstly, I’d advise businesses to start chasing their debts straight away if they are with individuals or sole traders – don’t let that October deadline creep up on you.

“Once this protocol comes into force, it is going to slow down the process of issuing a debt claim against individuals or sole traders and seven day letters are going to become a thing of the past.

“Businesses will have to provide lawyers with much more information and documentation before that letter can be issued – so it is going to increase the time and cost for companies wanting to pursue money that is rightfully theirs.

“Cash is, as they say, king in business so having money outstanding is detrimental to a business and its ability to meet its own costs – so slowing down the process will be damaging.

“If a creditor fails to comply with the new pre-action protocol, the claim could be struck out and costs could be awarded against them. That really would add insult to injury.”

Louise Bennett, the chief executive of the Chamber, said: “We are very grateful to Larry for highlighting this very important issue to our members.

“Cashflow is vital to businesses – especially SMEs – so it’s crucial that they are aware of these changes.”

This was posted in Bdaily's Members' News section by Matt Joyce .