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Debt collection strategies such as the issuing of winding up petitions are likely to be more widely used as the number of companies in financial difficulty continues to increase into 2010 and 2011. It looks increasingly likely that the UK economy will come out of recession during the final quarter of 2009. However, according to insolvency firm Begbies Traynor, 134000 UK companies are showing signs of being in financial trouble and they believe that business insolvencies will continue to rise for up to two years after the economy stops shrinking. This thinking seems to be backed up by a recent survey carried out by credit information provider Creditsafe. The survey has suggested that the number of companies who are suffering with late payments and bad debts are on the increase. 91% of the businesses surveyed saw an increase in bad debts during the past 12 months. Nearly 10% had bad debts equal to 20% of their annual profits. In line with the rise in the number of companies in financial difficulty, will be the increasing number of businesses trying to recover their bad debts. Different strategies to collect outstanding balances will be used, however it is likely that the issuing of winding up petitions will form a large part of these. In the last year and a half, the use of winding up petitions as a debt collection tool has become much more prevalent. If a winding up order is issued against a company, this has very serious implications for the business. Perhaps the most serious of these is the fact that the company's bank account will be frozen making continued trade extremely difficult. Many creditors are fully aware of the impact that issuing a winding up petition will have on a business. They therefore expect that if they pursue this action, the debt they are collecting will be paid swiftly. With such a powerful lever at their disposal, it is inevitable that the number of winding up petitions issued will be on the increase. Before considering a winding up petition the creditor must demonstrate that they have exhausted all other options. If they are unable to show that such efforts have been made, it is likely that the court will not grant their application for a winding up petition. With costs in the order of GBP2,500 (including costs of a statutory demand) this action will however not be taken for trivial debts. It is important that companies be aware that if they do face a winding up petition they must take swift action. If your business does receive a statutory demand for payment or a winding up petition you must get advice from an insolvency expert as soon as possible. Such an action can be successfully defended if it has been raised in error. Alternatively, a repayment plan can be negotiated with the creditor or a business rescue solution such as a Company Voluntary Arrangement or Pre-Pack Administration introduced. The most important message is that you must not ignore this type of action. Doing nothing could very easily lead to your company being wound up.
Article Source: http://www.seoserviceprovider.com/articles
If your business is in trouble, why not talk to us about a solution for your situation. More details at www.company-debt.co.uk. Derek Cooper is Managing Director of Cooper Matthews Limited (coopermatthews.com)and a member of the Turnaround Management Association UK.
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