Slater Byrne Recoveries UK

Prioritize Debt Recovery Before Resorting to Company Voluntary Arrangement (CVA)

The COVID-19 pandemic has undeniably impacted businesses across the UK – even established brand The Body Shop, which has traded for almost 50 years, has recently entered administration after reporting $76 million in losses in 2022. Many companies, because of low sales, challenging economic conditions, surge in labour and raw materials cost, and higher interest rates, are contemplating of entering company voluntary arrangement as they are unable to pay outstanding accounts payables, which also results in other companies facing mounting debts due to unpaid invoices, creating a cycle of financial stress.

There are many options available to businesses struggling to survive, including creditors’ voluntary liquidations (CVLs), compulsory liquidations, administration, company voluntary arrangements (CVAs), and receivership. In this article, we will focus on CVAs with an emphasis on exploring all avenues for debt recovery before taking the significant step of entering into CVA.

Understanding CVAs

A CVA is a formal insolvency process that allows an insolvent limited liability company to negotiate a repayment plan with its creditors. This plan typically involves paying back a portion of the debt over a set period. While CVAs offer a way to restructure debt and potentially save the business, they come with several drawbacks.

High Cost of Company Voluntary Arrangement

One of the biggest downsides of a CVA is the associated cost. Companies need to appoint an insolvency practitioner to oversee the process, and their fees can be substantial. Restructuring professionals say a CVA is estimated to cost between £25,000 – £35,000, more or less. Additionally, legal and administrative costs can quickly add up. These expenses further strain a company’s already limited resources.

Reduced Recovery Rates

Creditors are often hesitant to approve CVAs as they typically receive only a fraction of what they are owed. This can leave companies with a significant amount of outstanding debt, even after the CVA is completed. Moreover, the payment plan under a company voluntary arrangement may run for up to five years, diminishing the value of creditors’ recovery.

Damaged Reputation

Pursuing a CVA can negatively impact a company’s reputation. Potential suppliers and future investors may be wary of doing business with a company that has a history of financial difficulty. A CVA is also a court proceeding that puts a stay against creditor actions, thus limiting suppliers’ or investors’ power when it comes to negotiating payment terms.

The Debt Collection Advantage

Here at Slater Byrne, we recommend that before considering a CVA, it’s crucial to maximize your debt recovery efforts.  A professional debt collection agency can significantly increase your chances of collecting outstanding invoices. Here’s how:

  1. Expertise and Resources: Debt collection agencies have the experience and resources to effectively track down debtors and negotiate settlements. We understand the legal landscape and know how to communicate persuasively without being aggressive.
  2. Time-Saving Efficiency: Offloading debt collection tasks to a dedicated agency frees up your valuable time and internal resources, allowing you to focus on core business operations. Our debt collection process is also streamlined, which allows us to see results within 21 days.
  3. Increased Recovery Rates: Professional debt collectors achieve significantly higher recovery rates compared to in-house efforts. Our experience and proven strategies can significantly improve your chances of getting paid.
  4. Cost-Effective Solution: We work on a “no collection, no commission” basis, meaning we only get paid if we successfully collect a debt. This minimizes your upfront costs and ensures you only pay for successful recoveries.

Don’t Wait Until It’s Too Late

The sooner you address outstanding invoices, the higher your chances of recovering the full amount owed.  Debt collection agencies are most successful when they intervene early in the collection cycle.  By taking a proactive approach and utilizing the expertise of a professional agency, you can significantly improve your cash flow and avoid the need for a costly CVA.

Focus on Recovery, Not Restructuring

While company voluntary arrangements might seem like a solution, they should be a last resort.  By prioritizing debt recovery efforts and working with a reputable debt collection agency, you can maximize your chances of getting paid and keep your business on track for long-term success.

Don’t wait until a CVA is your only option. Contact us today and let our team of experienced debt collection specialists help you recover your outstanding invoices.