Is it still possible to recover cash from debtors during Covid?

With many businesses suffering a significant loss or reduction in income as a result of the changes to trading conditions, the importance of cash is greater than ever. ‘Cash is king’ at the best of times but now, it can spell the difference between life and death for many struggling businesses.

Amongst our clients, we have seen a significant number taking a long-term view with their own customers. For many, the value of the ongoing relationship means they have been prepared to be generous in their payment terms, understanding that their customers are facing similar difficulties.

However, with the situation now lasting far longer than many expected, it’s becoming more critical to recover cash to stay afloat.

But is cash collection possible at this time?

The answer is a simple yes. It may be more difficult than it was a year ago. There are a number of temporary restrictions in place due to the pandemic that make collection more difficult. For example, there are significant restrictions on the ability to threaten a company with liquidation, an effective debt recovery tool of old. Also, the sequestration limit has been increased from £3,000 to £10,000, removing the possibility of invoking sequestration to recover the vast majority of low level debts from individuals. Moratoriums against diligence have been extended thus safeguarding debtors from otherwise legitimate recovery procedures.

The good news is that there are still a number of things that can be done to collect cash, thus protecting your clients’ businesses. The Scottish Courts are now back open and are operating efficiently (perhaps more efficiently than they were pre-Covid). Sheriff Officers are still available to arrest bank accounts, place inhibitions and arrest earnings.

How can you help your clients to recover their debts?

• Businesses shouldn’t be afraid to protect themselves, despite the importance of their long term customer relationships. Generosity will be viewed favourably but in these unprecedented times, businesses need to be responsible employers and do what they can to protect their business and staff.
• Reassure your clients that debt recovery needn’t be threatening. There are various channels available to go about recovering debt from a friendly phone call or letter right through to court proceedings. The course of action will always be determined in conjunction with the business, taking account of all relevant circumstances.
• If things are critical, shout loud. It’s a truism that those who shout loudest are more likely to get paid quicker.
• Act quickly to secure your place in the queue. If your client needs legal assistance to chase down debts, appoint a lawyer quickly to ensure that papers can be lodged in good time and secure a court place, should that be required.

If you would like further information regarding the topics discussed in this blog, please contact:

David Alexander by email: dalexander@gilsongray.co.uk or by phone: 07841 920 089 / 0131 516 5362

You can also visit our Debt Recovery Team page by clicking here. 

The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.