If I suspect a customer or a supplier are in financial distress – what should I do?

Debt Advice

If you believe a supplier or customer is experiencing financial distress, it is important to find out as much as possible about their situation, in order to stop it having an adverse effect on your business. Our Bolton Insolvency Experts can give a free consultation if you find yourself in this situation. Identifying the signs of financial difficulty in a customer or supplier as soon as possible gives you time to think, consider and readjust. You may need to reorganise your source of supply, or to revaluate your options should your customer go out of business. The after effects when you lose a business connection like this can have a massive impact, particularly if it involves a principal supplier or key customer. Ben Cowgill at Bolton Insolvency Experts explains what should you look out for, and how can you protect your own business.

Indicators that your supplier/customer is in financial distress

• Avoidance of communications and guarded when you contact them • Late payments when previously there was no history of default • Company is not developing as you would expect – perhaps they are using out-dated technology, or selling assets with a view to streamlining the business • Customers requesting an extension to their credit terms • County Court Judgements have been made against the supplier or customer • Company accounts have been filed late • Directors or senior staff are resigning

Credit risk

The risk of offering credit to your customers can be mitigated with a strong credit management policy. Performing credit checks on your customers, not only at the beginning of the business relationship, but also at regular intervals will help to identify a decline. Other useful policies when dealing with credit risk include presenting clear terms of trade in all of your contracts. Terms and conditions might include: • Charging interest on overdue payments • Ownership of goods only transfers to the customer once final payment has been received • The obligation for customers to contact you immediately with any invoice queries or problems, rather than waiting until the due date

Companies House information

Valuable information can be obtained from Companies House. You can examine a company’s last set of accounts or ask your accountant to do this on your behalf, discover whether they have sold any business assets and if the proceeds have been used to pay trade creditors – this is a common sign that cash flow is an issue. If you are concerned about the financial stability of either a customer or supplier and are worried about the impact this could have on your own business contact Bolton Insolvency Experts today on 0300 303 8284 or via our contact us page for confidential, honest advice.