Coping With Credit and Debt During Covid-19 Disruption

Businesses of all kinds are adjusting to the very difficult circumstances we are all experiencing at the moment and are attempting to adapt to the rapidly changing trading environment. It is also becoming increasingly clear that all sectors will be affected and, Brexit aside may face a very different trading landscape in the long-term.

It is important, whether you are a creditor or a debtor, to act sensibly and swiftly to mitigate or pre-empt any issues.

Here are some of the things you might want to think about:

Be proactive  

• Most suppliers, distributors and retailers are going to be affected in some way by the restrictions to curb the spread of Covid-19. If you are trading with customers on credit terms, talk to them about their requirements, agree, where possible, extended payment terms; it’s in everyone’s interest to see businesses weather this storm and continue to trade long-term
• Similarly, if you are trading on credit terms with a supplier, don’t wait until you fall behind or for them to contact you to discuss your account. Take the initiative and present a sensible payment plan to your supplier; they will likely be encouraged that you’re alive to the potential issues and are seeking to head them off
• The Government is continuing to unveil various measures to assist businesses. If appropriate for you, ensure that you take full advantage of any stimulus package on offer

Be prudent

• Some customers may already be behind with payments or were already having difficulty meeting payments (e.g. by being persistently late). Don’t simply overlook this now. You need to consider carefully, on the basis of an assessment of each individual customer and their account history, whether extending their credit facility (and if so, by how much) is a sensible decision
   
• Sadly, some businesses will not survive the economic shock that the virus and resulting preventative measures are causing. While you should certainly work closely with ‘good’ customers, you need to protect your business from being over-exposed to potential bad debts; review your debtors now and identify any potentially problematic accounts that may require closer attention

Be practical

• Ongoing recovery action to recover bad debts is unlikely to progress as smoothly as it may have done prior to the current restrictions coming into force. The Court system may move more slowly and be increasingly disrupted. You are also likely to start receiving requests for payment holidays. Be reasonable but firm with these customers. You cannot get blood out of a stone and there’s generally little to be gained from taking a particularly hard line with debtors. However, bear in mind that the statutory limitation clock for the commencement of claims doesn’t stop ticking so if you’ve left matters longer than you should have (approaching 6 years), you need to act swiftly to protect your position
   
• While in many ways a secondary consideration, you also need to be mindful of your reputation. Carefully consider the consequences of your decisions and the potential risk of adverse PR in these difficult circumstances, even though your decision may be perfectly justified from a commercial perspective. It is very interesting to see how the public perception of various businesses is influenced and reported, mainly on social media, based upon how they are conducting themselves in this time of crisis; public impressions made now, rightly or wrongly, will undoubtedly endure beyond the conclusion of this pandemic

JCP’s Commercial Debt Recovery team is on hand to give you tailored advice on this important topic. If you need further legal support, you can contact David Owen (an Associate Solicitor in the team) on 01792 525 431 or email david.owen@jcpsolicitors.co.uk.

For further advice, please contact one of our local offices below:

• Swansea: 01792 773773
• Cardiff: 02920 225472
• Carmarthen: 01267 234022
• Caerphilly: 02920 860628
• Cowbridge: 01446 771742
• Haverfordwest: 01437 764723
• Fishguard: 01348 873671

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