Many struggling businesses 'now technically insolvent'

A new report says many companies are now technically insolvent and could be forced out of business by an increase in interest rates. Marcus Brown says the report emphasises the need for firms to get tougher over debt collection to avoid being dragged down.

The insolvency trade body R3 surveyed 500 companies when compiling its Business Distress Index.

It found that one in six businesses ind it difficult to pay invoices on time.

R3 President Steven Law said: "The increase in businesses struggling to pay bills on time is worrying as this is the technical definition of insolvency.

"This coupled with an increase in the number of businesses using the maximum overdraft facility, which stands at 1 in 5, suggests that many businesses are running on empty. For many, an increase in interest rates could push them over the edge."

The figures are not only alarming for the businesses involved but also for those who trade with them.

They emphasise the need to take action to recover unpaid debts as soon as problems arise. If you delay, you could see debtors going out of business before they pay your invoice.

Even at the height of the recession, many firms were reluctant to get tough over late invoice payments for fear of damaging their relationship with the customer - even though that customer was racking up significant debts.

Many firms got their fingers burnt that way and are now far less shy taking legal action as soon as debts start to mount up and polite requests for paymrent are ignored.

A simple letter from a solicitor is often enough to ensure payment.

The realisation that you are now taking the matter seriously means that debtors usually take notice immediately and settle very quickly.

However, if the debtor still doesn't pay after sending a solicitors letter then a firm can take Court action to recoverthe debt, interest on the debt and some of the legal costs.

Firms should not be afraid to pursue these options. It's only natural to want to maintain a good relationship with a customer but at the same time, a customer who doesn't pay is not worth keeping.

For more information call Marcus Brown on 0115 988 6728.

Firms don't have to give in to compensation claims

The belief in 'compensation culture' is so ingrained that firms will sometimes give in to claims they could successfully defend because they fear the court system is biased against them. Marcus Brown says a recent case shows that such fears are unjustified.

A myth has developed over the last 10 years that we live in a compensation culture in which a tiny mistake could see a firm being sued for hundreds of thousands of pounds.

Thankfully, like all myths, this is simply not true. A few sensational stories about extravagant employment or injury claims may sometimes hit the headlines but they rarely turn out to be accurate and are certainly not typical.

As long ago as 2004, the Better Regulation Task Force conducted a study into compensation culture and concluded that it didn't exist. If anything, the overall number of claims was going down rather than increasing.

That did little to dislodge the myth, however, which is unfortunate because it can affect the way firms approach employment tribunals or health and safety matters. Unfortunately, many firms will cave in and settle when faced with claims because, according to a recent CBI survey, they believe the justice system is ineffective or skewed against them.

It is important, of course, to pay due attention to safety issues and ensure all the correct legal procedures are followed when dealing with staff and customers, but firms should not be afraid to defend claims where appropriate.

A recent case before the Court of Appeal shows that companies can stand their ground and win.

It involved a supermarket customer who tripped over a basket which had been discarded near the check-out counter. She fell and sustained a painful shoulder injury.

The woman sued alleging that the supermarket had been negligent. The Court of Appeal, however, rejected her claim for compensation.

The court accepted the supermarket's evidence that it had good safety measures in place and had done all it reasonably could to prevent accidents happening.

The area was checked for potential hazards every five minutes or so. It was likely that the stray basket has been discarded by another shopper and had only bee left there a very short time.

The court also accepted that the staff were trained to remove stray items and so it was difficult to see what more the supermarket could have done to prevent the accident.

The customer's argument that a member of staff should have been assigned to check all aisles to identify hazards was setting too high a standard when other safety measures were already in place.

In any case, even if such a person had been employed, the accident could still have happened.

This common sense approach by the court system is the norm when dealing with compensation claims. Firms should not be afraid to defend a case if they have done nothing wrong. It is cheaper and far more satisfying than simply caving in to unreasonable claims.

For more information please contact Marcus Brown on 0115 947 0641 or email mbrown@andersonssolicitors.co.uk

New recuit at Andersonws Solicitors

Nottingham law firm Andersons Solicitors bolsters its Dispute Resolution Department with the arrival of Alex Brooke-Smith. Alex joins Andersons Solicitors from Bakewells of Derby where he qualified as a Solicitor in 2009.

Alex offers pragmatic and practical advice to commercial and civil clients on all areas of dispute resolution with a particular interest in Landlord and Tenant and Insolvency.

Commenting about his appointment Alex says: "It's a fantastic opportunity joining Andersons Solicitors' Dispute Resolution team. The team take a sensible and commercial approach to disputes which fits my style perfectly. There are some tops lawyers here and I hope I can add to the firms' excellent reputation."

Andrew Scott, Head of Dispute Resolution comments: "We are thrilled to have Alex on board. He is a great addition to the team and will ensure that the high level of service that is synonymous with Andersons Solicitors continues."

For more information please contact Carly Williams on 0115 947 0641.