IT IS a harrowing prediction that at least 250,000 small businesses will collapse unless the Government offers more sufficient help for them to endure the restrictions brought about by the pandemic.

If you are a supplier of goods or services, you normally will be classed as an unsecured creditor in an insolvency process and would, unfortunately, be among the last in the hierarchy to receive payment when a customer goes bust. This means that in the current financial crisis, as a company director you must be on high alert when dealing with your customers to avoid losses if they become insolvent.

There are, however, some steps you can take in an effort to protect your company if, sadly, a customer were to enter an insolvency process.

Get the basics right and show financial discipline at all times. Set credit limits or ideally get an upfront payment. Raise sales invoices in a timely manner and send out regular statements. Monitor supplier stability and engage with your customers so that you can understand how your customers are trading.

You can also include a straightforward retention of title clause within a contract of sale, meaning you could claim back stock in the event that full payment had not been received. Customers must be made aware of this for it to be enforceable. An “all monies” clause will also offer protection but this is a complex area where legal advice would be appropriate.

It is also worth noting that a change in the insolvency legislation in 2020 now means that you can no longer rely on the insolvency event to terminate the contract with the customer in question. Seeking advice as to how that might impact your own business will be worthwhile.

It is very important to get the right professional advice regarding contracts and debt collection. If you feel that your customer could be heading for some sort of insolvency procedure you need to contact an Insolvency Practitioner. They will be able to talk to your customer, on your behalf. And who knows they may be able to suggest a recovery strategy to your customer that could save the day.

For insolvency advice, call Mike Kienlen on 07770 536214 or email