It is every supplier’s worst nightmare. You have finally secured a lucrative contract with a big name global brand, giving you what feels like a sense of security and assurance for future earnings.
Then, all of a sudden, the unthinkable happens - the company goes bust. From a position of relative comfort, you now find yourself at the back of a long queue chasing unpaid invoices you may well never recover.
Depending on how reliant your business is on that one big client, you could easily find yourself in jeopardy too, unable to absorb the loss.
The recent high profile collapses of Toys R Us and Monarch Airlines prove suppliers should never be too complacent about their future prospects, no matter how established their biggest client is or how much they earn from them. In the wake of Monarch, the UK’s fifth largest airline carrier, entering administration, most of the attention focused on the immediate issue of getting customers stranded abroad home, and whether there would be compensation for the 300,000 cancelled bookings.
Much less attention was given to the fact that the collapse has left many other businesses out of pocket, too. Caterers, equipment suppliers, the people who print the in-flight magazines or manufacture the air crew’s uniforms - they will all now have to wait for the long, slow process of administration to run its course before they find out whether there are any assets left in the business to cover outstanding invoices.
The problems facing iconic children’s retailer Toys R Us have so far only affected the company’s US operations, where, despite being the country’s biggest toy store chain, it has filed for Chapter 11 bankruptcy. But it does not take long for the ripples to cross a pond even the size of the Atlantic, and there are now reports that UK toy suppliers are halting deliveries to Toys R Us stores here amidst fears over getting paid.
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Looking after number one
You have to say that those suppliers deciding not to fulfil deliveries to UK Toys R Us stores are taking the prudent course of action, however unfortunate. With the parent company entering the US version of administration, they have every right to be concerned about invoices being paid.
No matter how big an institution your client is, suppliers cannot afford to be complacent. Should a business fail, suppliers are often last in line behind investors, shareholders and customers to gain recompense from remaining assets. Therefore they have to keep their ear to the ground for any murmurings of financial trouble, and when they have to, act in their own best interests.
The writing has been on the wall for Monarch for some time. In 2014, it had to restructure with staff taking a pay cut after recording heavy losses, and then again in 2016 it reported a deficit of £300 million as terror attacks in North Africa led to dramatic fall in demand on key routes to Tunisia and Egypt. No suppliers now waiting on payment can say they are surprised by recent events.
Similarly, Toys R Us has failed to keep up to date with modern shopping habits, neglecting to launch an ecommerce platform as the likes of Amazon have taken a massive slice of the toy market. These are again warning signs astute suppliers should be reading, and looking to diversify their business accordingly.
All of that being said, this serves as a timely reminder to keep a close eye on your invoices, whatever the size of your client. Late payments, especially if they become a habit, are another sure sign that all is not well. Get into the routine of chasing payments as soon as they become late, giving you the best chance of recovering what you are owed early. And if the signs are that this is becoming a regular problem, act by looking for new business opportunities. You can never be too sure how long a source of revenue might last.
If you are having trouble getting payment on time on a regular basis, a professional debt collection service can help. Safe Collections specialises in recovering monies owed quickly, efficiently and amicably. Don’t wait to hear that your client has gone under - get our impartial advice and get your money back before it is too late.
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Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.
Image "Toys R Us" by flickr user Mike Mozart is licensed under CC BY 2.0