Why are businesses turning their backs on CCJs?

16/05/2016

Despite ongoing late payment issues, the use of County Court Judgments (CCJs) against businesses is at its lowest level since before the financial crisis.

According to figures released by Registry Trust, the number and total value of CCJs issued against businesses in England and Wales fell significantly in the first quarter of 2016, to the lowest level since before the crash.

A CCJ is a judgment issued by the courts that orders a customer to settle a debt, all the relevant costs and interest within a certain time frame.

Once issued, if the amount owed is not paid within one month, the CCJ will be placed on their credit record for six years, making it harder for them to obtain credit in the future.

With late payment putting significant pressure on businesses’ cash flows you’d expect more businesses to be utilising the courts in an attempt to get their money back.

But, with the figures showing that fewer businesses are using this tactic, it raises questions about why businesses are turning their backs on CCJs.

In Q1 2016 there were 21,860 CCJs recorded, marking a 17% year-on-year decrease and a significant drop from the financial crisis high of 71,867 judgments in Q1 2009.

The total value of CCJs against businesses also fell by 11%, from £87m in Q1 2015 to £78m in Q1 2016.

The drop in use could be related to a dramatic increase in court fees that may have deterred some businesses from taking action.

Or is the decrease in CCJs because there are better options available?

For many businesses, CCJs are a last resort option, as the time and costs involved can make it quite a challenge and success is not always guaranteed.

Instead, businesses could be improving their in-house credit control capabilities or outsourcing their debts to specialist commercial debt collection agencies who excel at recovering overdue invoices.

Often, the added weight of a third party can be the push that’s needed to encourage a customer to settle any outstanding invoices. And, unlike the court process, most collection services are success-based, which means you don’t pay unless your money is recovered.

The important thing to remember is that no two debts are the same and, as such, require individual assessment to decide the best course of action.

What do you think? Why are fewer businesses turning to the courts for help in the fight against late payment? Please share your views in the comments below.

For more information about your options when a debt becomes overdue or to talk to someone about your specific situation, please call 0800 9774848 or email collections@hiltonbaird.co.uk.