An increase in the number of bad debts being reported for collection has been held up by recovery specialists Lovetts as evidence that non-payment is on the increase.
In the second quarter of 2014, the total number of debts being chased by Lovetts grew by 27% compared with Q1, which the firm says is an indication of a rise in overall business levels within the economy, and a sign that government initiatives to encourage prompt payment are not working.
CEO Charles Wilson said: “The huge increase in the number of commercial debts on businesses’ books in Q2 2014 vs. Q1 is a sign of a busy sales ledger, which is good news, but also something that needs to be managed very carefully.
“It’s all well and good bringing more business [in] but not if it means more time chasing up customers to get invoices paid.”
However, there is another statistics in Lovetts’ report that is worth noting – according to the firm, businesses are moving more quickly to recover debts through legal action.
This alone might not explain the full double-digit upturn in activity, but combined with seasonal effects and the more general emergence from recession, it may be that firms are just being faster to act on non-payment.
We see this as a good thing; taking action more quickly should mean debts are recovered sooner, leaving less outstanding trade debt on companies’ books at any one time, and reducing the number of debtors who get away with persistent non-payment.
In turn, this puts the money where it belongs, within the company’s accounts, allowing it to be used to pay their own invoices; just as bad debt can echo along supply chains, coherent credit control can do so too with an amplified positive effect.
As the UK economy continues to recover, we hope to see further upswings in activity throughout the debt recovery industry, as a further indication that businesses will no longer be held to ransom by non-paying customers, but will exercise their legal right to recover what they are owed.