Dealing with companies about to go bust

Dealing with Companies About To Go Bust

Instability seems to be the new normal. Where once it was possible to give a reasonable about of leeway to those you worked with, extending invoice time or accepting part payments without really worrying (after all, they’re good for it), with so many businesses collapsing under the weight of the pandemic, it may be necessary to be a little more aware of impending doom—and to do what you can to make sure you don’t get pulled down with them.

Putting your own businesses finances first

When you are a smaller business, a delayed invoice or missed payment can have a devastating effect. If you are trying to make sure that every employee is paid on time (yourself included!), suddenly losing hundreds, or thousands of pounds of expected income can make a serious dent in your cashflow.

Knowing that you have responsibilities to your staff and your company means that in unstable times you have to be willing to put yourself first. If there’s any chance your bank account can’t take a substantial hit, it’s imperative that you are not in the position where it is going to have to.

Looking for the warning signs in clients’ behaviour can help you plan ahead and make adjustments.

Here are a few of the things that show that a company you previously relied on may no-longer be the stable regular payer they once were.

When payments are late

Perhaps the most obvious sign is the late payment. Even when it appears in your bank account a few days later, it’s unlikely that a regular payer really did ‘just forget’. Those three days of delay can mark a problem with their own cashflow, and if they’re juggling this month, next month might be worse.

Any delay longer than a week is definitely a red flag, and promises that ‘it’ll be with you soon’ that get broken should have you running for the hills.

Of course, there’s definitely room here for some understanding. If you have a good relationship then giving them a quick call and offering some help is probably better than assuming the worst – communication is key. Just be sure not to offer them something you can’t actually afford. Yes, a late payment is better than no payment at all, but a ‘oh you don’t have to worry about us, just get it to us when you can’ might find you at the bottom of a very big pile, and a debtor thinking ‘phew, got out of that one’. Far better to be friendly but firm: ‘I understand, maybe we could make it easier by splitting it into four payments’ will likely get you the entire amount over the next couple of months, and still be a very appreciated concession.

When they go silent

Being unable to pay is embarrassing, and many people will turn to avoidance and silence rather than face it head on, hoping that tomorrow will be better.

It could be that they are busy (hopefully trying to get you the money you are owed!), but a debtor who can’t find the time to drop you a quick email is more likely to be running away.

There’s very little you can do if you cannot open communications. If you do have any current work with them, though, stopping that can often force a dialogue—even if it feels a little like brute force. If you are worried that any future work isn’t going to see you being paid, however, perhaps some brute force is necessary.

When they slow down with orders

It might not mean they disappear owing you money, but when a customer you rely on for regular business and income starts pulling back with the amount that they use you, it’s often because they are unable to afford you and are tightening on the purse strings (assuming that you are still providing the same quality work, and they’re happy with it).

This is a sad situation, but one that hopefully will recover after the storm. Contact them, check that everything is OK, and make sure that you retain those ties even if you take a few months away from each other. You’ll be eager to have them back when they’re on their feet again, and they’ll respect you more for the consideration. It might not be an immediate win-win, but it’s good in the long run.

When it’s all change

Big businesses go bust, too, but often, before they do, they go through a period of personnel restructuring, moving people from one department to another, bringing in consultants, and changing the way they worked to try to streamline. Sometimes this works, often it doesn’t.

If you have a client who seems to be restructuring with regularity, it’s time to pull back a little. It might be nothing more than some strange management decisions, but it could be a death knell.

When smaller businesses rely on a single larger business as their main turnover, anything that brings down the client can have devastating ripples with those who work for them. Don’t become a casualty due to your association. At the first sign of trouble, widen your client list a little, do a little less work for the company showing signs of worry, and a little more work for a spread of different customers.

If it all goes wrong, you’re safe with your other streams of income, and if not, then you can still enjoy a solid revenue from your main source.

What to do when you suspect a disaster is looming

One: communicate

Communication is important in any problematic situation. By contacting your customer and checking their status with them, you can often find yourself reassured and any paranoid worries flying away. If they are in trouble, you can help them by letting them know you understand and offering a payment plan or other reasonable alternative.

Two: take stock

Make sure you are fully in control of your own finances. See what you need to do to keep going if you never see the last payment from this fragile client. If you need to find other work to plug the hole that will come from their loss, then start the process of looking right away. Maybe see where you can cut back on your own expenditures to weather the storm—but don’t become part of the problem yourself by letting down those who are relying on you!

Three: plan the future

Learn from the experience and put systems in place to help mitigate it ever happening in the future. If you can, make sure you have a good spread of customers and don’t rely on a single source for the majority of your income.

Four: consider legal intervention if you are owed money

If the sum owed is great than £750, then it is possible to go to the small claims court to try to recoup your loss. Depending on the amount owed, doing this may be worthwhile for you, but do consider the number of work hours you are going to lose pursuing this course.

At Rapid, we’re not legal experts and can’t advise further. If you need to consider a legal route, then speak to your solicitors.

How using RapidQuote software can help

Rapid software can’t help you get back any money that is owed to you, but it can help you see these warning signs earlier. With in-depth reporting and tools to help with accurate quantity surveying and estimating, the numbers you will be providing your customers will be perfect, allowing you both to go into any project with your eyes open. Of course, Rapid also gives you the tools you need to report on costs and help properly manage the finances throughout the project.

It’s not quite a team of bailiffs, but it’s a lot better than having to scour through a hundred scraps of paper to see exactly what’s owed on what, and why!

To improve your business efficiency and help you stay afloat in turbulent waters, why not try a demo!

Find more details on how RapidQuote’s software tools can save you both time and money here or get in touch with our team directly. If you would like to see our software in action at a date and time that suits you, you can book a guided demonstration for free here.

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