Sharp rise in CCJs against businesses
The number and total value of County Court Judgments (CCJs) issued against businesses in England and Wales rose sharply during the first quarter of the year, according to Registry Trust.
A CCJ is a judgment issued by the courts that orders a customer to settle a debt, all the relevant costs and interest within a certain time frame.
Once issued, if the amount owed is not paid within one month, the CCJ will be placed on their credit record for six years, making it harder for them to obtain credit in the future.
With late payment putting significant pressure on businesses’ cash flows it’s perhaps not surprising that more companies are utilising the courts in an attempt to get their money back.
In Q1 2018, 32,002 CCJs were registered against businesses in England and Wales, a 7% increase on the previous year.
It’s the first time in four years that the number of CCJs issued has risen year-on-year.
However, Registry Trust noted that the presence of 2,125 judgments against easyJet was an unusual feature affecting the numbers.
The average value of an adverse business CCJ rose was £3,164, a 17% increase.
What does this mean?
It is hard to determine exactly what caused the sharp rise in CCJs but, with UK businesses currently facing a number of obstacles, it’s perhaps not surprising that they’re taking the steps to tackle late payment and protect their cash flow.
With the economic uncertainty surrounding Brexit, a skills shortage and rising business costs, there’s already a host of threats to cash flow before late payment is even considered.
And with cash flow one of the leading causes of business failure it is necessary for businesses to fight for what they’re owed.
- 21 warning signs that your customer can’t afford to pay you
- Your options when a debt becomes overdue
- What To Do When An Invoice Exceeds Terms
But, is there an alternative option?
Whilst CCJs can be effective in the fight against late payment, the time and costs involved can make it quite a challenge and success is not always guaranteed.
Instead, it could be more beneficial to outsource these debts to a commercial debt collection agency who will excel at recovering the overdue invoice.
In the same way that taking legal action shows clients you mean business, the added weight of a third party can be the push that’s needed to encourage a customer to settle any outstanding invoices.
And the added benefit is that unlike court proceedings most collection services use success-based pricing. This means that you only pay if your money is successfully recovered.
It’s always worth remembering that no two debts are the same. Each overdue invoice will need individual assessment to decide the best course of action.
Remember, prevention is better than cure
Businesses could be improving their in-house credit control capabilities to prevent late payment from occurring in the first place.
It’s promising to see that there were 56,881 public requests to search the register for England and Wales online during Q1 2018. A 6% increase on Q1 2017.
This suggests that businesses could be taking more proactive steps to find out what risk a potential customer poses before offering credit.
But this information must be used alongside other data sources such as credit reports and account opening forms to get a full picture of the potential risks.
Then using this information precautions should be taken. For example, you could request payment upfront or a deposit.
For more information about your options when a debt becomes overdue or to talk to someone about your specific situation, please call 0800 9774848 or request a call back.