John Bett

John Bett believes that myths surrounding the legal avenues available to secure outstanding debts put off many smaller business owners from taking robust action.

And, with the financial year-end approaching, he believes that many SMEs are reaching a critical point in ensuring they can balance their books and look forward to the next 12 months with renewed confidence.

Mr Bett, a partner and head of dispute resolution and litigation at Lindsays, said: “With the overall financial landscape remaining incredibly challenging, the serious detrimental impact of late or non-payment cannot be ignored. But far too many reluctantly let payments slip or disappear without pursuing them legally.

“The final few weeks of the financial year can be stressful. To avoid the pain from outstanding invoices extending into the next financial year, it is important that businesses take action to ensure that all debts are recovered.

“For all businesses – but SMEs often operating on tight margins in particular – good cashflow and prompt payment is what sustains them, particularly when they may have had to meet significant outlays to complete work.

“Too few businesses realise the steps that they can take, partly due to the myths surrounding the process for debt recovery which can discourage some smaller businesses from seeking legal redress.”

According to the Smart Data Foundry, late payments cost SMEs across the United Kingdom an average £22,000-a-year – and the Federation of Small Businesses reports this causes 50,000 business closures every year.

Mr Bett said: “There are several misconceptions about the debt recovery process. For example, some businesses believe that it is not financially viable to pursue smaller debts through the courts.

“While there can be economic challenges in recovering smaller debts, taking action can be less expensive than many people think – and there are options that allow businesses to manage the cost. 

“Another issue which sometimes comes up is the age of the debt, but most can be pursued up to five years after becoming due in Scotland – although pursuing early is much more likely to result in a recovery.”

Lindsays lawyers say the most common feedback they hear from businesses yet to pursue debt is that the process is overly complicated.

Mr Bett added: “Whilst pursuing legal action can seem daunting, a good legal team will make the process straightforward and seamless for the business.

“The key is to take action early, as doing so can save time, improve cash flow, and reduce the likelihood you’ll need to write-off bad debts.”