If it feels like more businesses are struggling to pay their bills lately, you're not imagining it.

Over the last few years, we've seen an increase in County Court Judgments (CCJs), company insolvencies and businesses simply running out of cash. While the numbers fluctuate from month to month, the overall picture is clear – many companies are under far more financial pressure than they were just a few years ago.

Why are more businesses failing?

There isn't one single reason.

Businesses have had to deal with rising energy costs, higher wages, increased borrowing costs, inflation and weaker consumer spending. Many companies that survived the pandemic have now reached the point where they simply can't keep juggling overdue tax bills, supplier invoices and loan repayments.

HMRC has also become much more proactive in pursuing unpaid taxes, which has led to an increase in formal insolvency action.

For suppliers, this creates a serious problem.

Waiting can be expensive

One of the biggest mistakes creditors make is believing that a good customer will eventually pay.

Sometimes they do.

Unfortunately, many don't.

If your customer is already struggling with cash flow, every week that passes increases the chance that another creditor will obtain a CCJ first, issue insolvency proceedings, or secure payment ahead of you.

By the time you decide to act, there may be nothing left to recover.

Check before you chase

Before spending money on solicitors or debt collection agencies, it often pays to carry out some basic checks.

Has the business already got CCJs?

Have insolvency proceedings already started?

Are directors resigning?

Have accounts become overdue?

Has the company recently changed address?

These simple checks can tell you a lot about whether you're dealing with someone who simply needs a reminder, or a business that's heading towards insolvency.

Don't ignore the warning signs

Some common red flags include:

  • Constant promises that payment will arrive "next week".
  • Ignoring emails while remaining active on social media.
  • Requesting long payment plans without making the first payment.
  • Frequent changes to payment dates.
  • Excuses that become increasingly far-fetched.
  • Suppliers starting to complain publicly.

None of these prove a business is insolvent, but together they should encourage you to act sooner rather than later.

Court should always be the last resort

I'm a big believer that court action should usually be the last option, not the first.

A well-written letter, a sensible phone call or simply demonstrating that you've done your homework is often enough to persuade someone that ignoring the debt is no longer an option.

If that doesn't work, at least you'll know you've exhausted the sensible options before spending money on legal action.

The bottom line

The economic climate remains difficult, and unfortunately more businesses are finding themselves in financial trouble.

If someone owes you money, don't assume they'll still be around in six months' time.

Carry out a few checks, keep good records and don't leave debts gathering dust in a drawer. Acting early almost always gives you a better chance of recovering what's yours.

That's exactly why I created the Debt Recovery Manual—to help businesses recover debts themselves before paying someone else to do it.