Posted 12 July 2018 By Steve Elliott, Business Recovery and Insolvency Partner
In Business Recovery & Insolvency
We often advise businesses that are impacted by the failure of a customer, often with dire consequences for cash-flow. Only this past week, we have been trying to help a small installation company which has lost over £65k to bad debts in a few months; the knock-on effect has meant they can’t pay key sub-contractors, who have “downed tools” on contracts in progress, which will impact on those debts as well (and, for obvious reasons, any others for the same customer that are not yet paid!). At the very least, they will need a “time to pay” arrangement with HMRC.
It has felt like this issue is becoming more prevalent and we now have some harder evidence of that and which industries are more likely to be impacted. The Insolvency Practitioners’ trade body, R3, have carried out a survey of UK companies which makes interesting reading:
LINK TO SURVEY
Over a quarter (26%) had suffered a hit in this way, in the past six months
Unsurprisingly, construction is the hardest hit sector (almost half reported losses), followed by wholesale and transport. In our experience, smaller companies are more likely to be affected by the loss of a main customer or supplier; they often don’t have the “critical mass” needed to have in house expertise to draft and keep control of contract paper-work, which (particularly in the construction industry) can leave them open to delays in payment and manufactured disputes. They are also less likely to have a professional credit control function, leaving them susceptible to letting debtor-days drift out.
These skills can be outsourced and there is much great advice to be had in the South West at very reasonable cost. If the worst happens, those who take early advice and have a plan, will be more likely to survive themselves.
To discuss this or anything else, please contact Steve Elliott on 01793 818300 or send him an email.