In the current climate stories are emerging daily of situations where suppliers can no longer obtain credit insurance in respect of particular customers.
In uncertain times, this raises some very difficult dilemmas for suppliers who may need the turnover from customers to enable them to continue to trade.
So what can suppliers do to get to and stay at the front of the queue for individual customers?
- Information is power – it is vital to stay constantly in touch with the customer so that you are aware of what is really going on.
- Insist credit limits are maintained – this is likely to require excellent accountability within your own sales and account management teams.
- Use your leverage – if you supply an essential service or materials, then use the leverage this gives you.
- In an extreme case do not be afraid to threaten winding-up for undisputed amounts to ensure you get paid. A threat of winding-up can improve your chances of payment dramatically, but do not use this tactic if there is any question or dispute about the amount due.
- Do not negotiate without thinking through the interests of both parties in both the short and medium term. Careful negotiation again may enable you to extract yourself from a position which you do not wish to be in.
If the worst happens and insolvency practitioners take charge of a customer do not deal with them or negotiate without understanding your position. Although administrators and liquidators have real power you may still have a chance of mitigating your position if you understand the rules.
For example, did you know that administrators cannot:
- Expect creditors to continue to supply goods or services without being paid for those new supplies.
- Unilaterally alter the terms of long-term contracts if they wish to continue with them.
- Unfairly prejudice the position of a particular creditor or group of creditors.
- In general terms disregard set-off rights.
- Disregard the rights of the suppliers who have valid reservation of title ("ROT") clauses in their contracts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
