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August - September 2009
BUSINESSES CAN PROTECT THEMSELVES AGAINST THE DREAD ‘D’ WORD
Debt has been at the centre of the financial crisis which has engulfed the globe, and among those affected have been small and medium sized enterprises.
For the many SMEs owed money for the services and products they provide, obtaining what they are owed could be the difference between survival and failure in these difficult economic times.
A recent study by Barclays Local Business revealed that more than £10 billion is owed by debtors to UK SMEs. As cash flow is the life-blood of many of these businesses, debt recovery is now a central feature of their survival.
However, with the British Chamber of Commerce now urging SMEs to take advantage of overseas trading to help Britain’s economy grow, one would understand if they were cautious for fear of being owed even more and encountering further problems.
For many SMEs, overseas opportunities can be intimidating for the very reason that chasing debt might be more difficult. However, while caution is advised when it comes to debt, SMEs should not be hindered by that caution.
The law can provide protection against debts owed to SMEs in England & Wales, domestically as well as overseas.
Get it in writing
Whenever a new working relationship is established by a business with another business or a customer it is essential to get a solicitor to draw up a contract, setting out payment details, such as amounts due, dates of when to pay and what should happen if payments do not occur.
The contract should also accommodate for any disputes that arise from non-payment. Court can be expensive and neither party will want to go that far unless it is necessary, so businesses should discuss with their solicitor when drawing up a contract the prospect of including a clause for alternative dispute resolution (ADR) to be used to settle any disputes.
Even where there is a business relationship with overseas businesses, a solicitor can draft the contract to comply with the law of England & Wales, provide guidance on where to seek advice on the laws of another country, as well as give additional advice on other important matters affecting the business relationship, such as how exchange rates might affect payments.
The Law Society’s Lawyers for Your Business scheme is a network of 1,000 solicitor firms in England and Wales offering specialist advice to small and medium-sized businesses.
The initial Lawyers For Your Business consultation is free. However, it is important that SMEs clarify estimated costs at the outset before deciding to proceed. LFYB solicitors can help on a number of business matters, including contracts with customers and suppliers.
Many businesses fear the cost for using lawyers is too high, but the cost of not uing one can be higher and potentially crippling.
Running a business can mean ensuring compliance with a lot of legislation relating to employment matters, health and safety, tax and a number of other factors involved in business. Getting a solicitor on board early can help businesses untangle themselves from this mountain of red-tape.
As well as LFYB, many solicitors up and down the country are providing drop in clinics for SMEs to discuss any legal queries. Any small or medium sized enterprise which needs to find out more about debt recovery or any other legal matter should find out if the solicitors in their area can assist.
It is essential for the UK economy that SMEs survive, grow and thrive. Having a trusted adviser in the shape of a solicitor can help that happen.
While no business wants to have debt or be owed debts, debts do not have to become the death knell of SMEs.
Find out more from www.lawsociety.org.uk/lfyb