The obvious one is that they are slower to pay than normal, but they might start paying lump sums, instead of specific invoices, or start making more frequent, smaller orders. If they stop ordering altogether, it may well be that they have used up their credit with you, and are now running up credit with another supplier.
The loss of a customer will mean more than just a bad debt. If they are a significant customer, you have the problem of replacing those lost sales. There might be an adverse effect on your own margins and profits and you might need to reshape your own business to compensate. Speaking to your customer early enough might mean the difference between that customer’s survival and its failure; between keeping those sales and losing them.
Whatever the symptoms, if they are struggling to pay you, or suffering from cashflow difficulties, you need to be alert to the signs, your options and how we can help.
All too often we see businesses trying to help (e.g. by extending more credit or longer payment terms) without their customer getting to grips with the underlying problems. The first step is good, effective credit control which is alert to the early signs of financial stress and can warn you in time to do something.
You should make sure that your retention of title clauses are effective and can be relied upon. Visit your customer and have a look round, if you can. See how busy they are. See if your stock is on site. If they have got your stock they cannot sell, but which you can sell to other customers, take it back, issue a credit note and supply stock that they can sell, preferably on a pro-forma basis.
Insolvencies numbers in England and Wales quadrupled over the last two decades.Closing the Gap - Gender and the Changing Demographics of Insolvency
Over 14000 businesses entered insolvency in the past years – that’s roughly 3 every two hours.National Statistics - Insolvency Statistics August to September 2015, October to December 2015, January to March 2016, and April to July 2016
If their delayed payments to you are more than just a small blip in their cashflow, you may well be able to persuade your customer to take advice. They will not want their business to fail any more than you do. If they are receptive to offers of help, we could speak to them and see if their plans are credible, and advise you whether you should support them or not.
If their business needs to be restructured, you would do better to assist the restructured business with increased credit or longer payment terms, rather than just putting good money after bad in the current business. If we are introduced early enough, we might be able to assist them with a Company Voluntary Arrangement, or advise them on how they can restructure the business to everyone’s benefit.
Suppliers see the early signs of financial stress in their customers. Slow payment is usually the earliest sign of all. If those signs are not acted upon, it may be too late for effective steps to be taken. Failure to act might mean that the next contact you have is when your customer has already contacted an Insolvency Practitioner. There are still steps you can take to stay involved, but there will be less time to act and less chance that you can recover some or all of your debt.
The latest statistics for insolvencies in England and Wales covering the last quarter for 2017 reflect a difficult year for companies and individuals. The Association of Business Recovery Professionals, R3, have highlighted a number of trends in the latest insolvency figures from the government. Corporate Insolvencies Corporate insolvencies rose by 2.5% to 15,112 in 2017 […]
The Financial Conduct Authority (FCA) is considering a clampdown on companies that provide high-cost credit to consumers. This could include imposing a cap on interest rates charged. Such a move would be a follow up to the FCA’s 2015 clampdown on the high interest rates charged by so-called “payday” loan companies. It is understood that […]