Friday, 31 October 2008

Protect your profits warning

Act quickly to protect your company profits if one of your customers runs into financial trouble - that's the warning from Stuart Haynes of our Commercial Team.

Growing numbers of firms are slipping into liquidation or administration as the credit crunch continues to bite, and Stuart said it was important to check out the nature of the customer’s financial troubles to maximise your chances of recovering the debt.

“If you are owed money, there is an important difference between a customer in liquidation, and one which has gone into administration. If the company’s contract contains something called a Retention Of Title clause, and it is in liquidation, then you might still be able to get your goods back.

“The first thing to do is check your paperwork to see if the ROT clause is there. If it is, contact the liquidator straight away. They often try to put creditors off by questioning the validity of your claim, but don’t give up.

“Once a company is in administration, its creditors can’t attack it. So this is potentially bad news because not only is your debt frozen, but you also can’t play the ROT card either. If you get a request to carry on trading with a company which is in administration, check how you are going to be paid.”

Stuart said: “In the current climate, it’s no surprise that company liquidations and administrations are on the increase. But it is important to realise that you do have rights if you are owed money by a business that gets into trouble. Keep detailed records of transactions, itemised lists of services, and all relevant invoices – you must be able to prove that the company received your contract before any kind of liquidation or administration deal was done.”