Warning signs
Often suppliers first hear about a company being insolvent when they are contacted by an Insolvency Practitioner and at this stage it is often too late to recover the debt. However in many cases there were warning signs that could have assisted the supplier in minimising their exposure.
Warning signs
Warning signs could include:
Unusual payment pattern; e.g. paying round sum amounts when usually the full balance would be paid;
Unusual purchasing pattern;
Slow or delayed payment;
Changes in employees within the customer's business, e.g. change in FD or key contacts;
Rumours in the industry;
Seeking a sale of the business at an unexpected time;
Late filing the company's accounts;
Other suppliers and creditors obtaining CCJs against it;
Exceeding credit terms:
Changing suppliers or an order from a 'dormant' customer;
Changes in credit rating; or
Withdrawal of credit insurance.
Where a business has symptoms that it is experiencing financial difficulties action should be taken to minimise the risk of non-payment. This may include placing the business on stop, threatening legal action, collection of goods subject to reservation of title, etc.
By the time the business has entered into a formal insolvency procedure the damage may have been done but it is often possible to minimise these losses by swift initial action.
