Bad Debts

Virtually everyone who has had a meeting with me for the last six months at least has asked the same question: “how is the recession affecting you?” My normal reply is that it doesn’t seem to be affecting us much in terms of turnover (our most recent full month was June, which was 20% up on June 2008 – largely due to the tremendous weather). However, what has had an impact on the company since January this year, in particular, has been bad debts, and customers taking longer to pay. Several small customers, and a couple of large ones, have gone out of business owing us a considerable amount of money in total. The smaller ones, I can excuse. These things happen and generally the owners have acted with integrity. However, there are a couple of larger ones that I want to talk about, both of which have raised issues of injustice, and point to areas that the government need to look at reform.

The first example is a brand new food hall set up in London last autumn. I understand the set-up costs were £2million. They traded well until Christmas and even paid us for September’s invoices, but that was all we got. Early in the new year, they went into liquidation owing us our largest ever bad debt and owing several other suppliers thousands of pounds, who inadvertently footed the bill for their large set-up costs. To make matters worse the following day after liquidation they had set-up again, and were open for business with an empty creditor’s book. How can this be right? A London wholesaler also did this last year – twice and is now finished for good – hopefully. It is time the government put an end to this practice, which is currently legal, but seriously undermining of suppliers with integrity. How the “new” business had the gall to approach its former suppliers as if nothing had happened is beyond me!

Secondly, consider a delicatessen owned by a TV chef in the South-East of England. I have recently heard via another TV Chef that this particular one is the best paid in the industry and commands a multi-million pound salary. The deli, coincidently closed for a food-poisoning outbreak last year, still owes us for their Christmas orders for 2008. Despite several bounced cheques and being sent to the debt collectors the monies are still outstanding, so we took him to court last week. As I write I am still awaiting the outcome.

I am more than happy to let anyone know the names of these two businesses so you can avoid supplying them in the future. Meanwhile back to my subject from a couple of weeks ago – networking. I am trying at present to get credit controllers from companies in the speciality food industry to meet together regularly and share information. It is time to ensure that suppliers unite together against bad customers and stop them running up debts with one company and then moving onto another supplier. Let’s help stop this destructive practice!