At the back of the queue

 

The economic environment is uncertain, and at the OSBC we’re seeing signs that some bigger customers are attempting to hold onto cash, your cash, to make sure their own business is on a more solid financial footing. Alternatively, they’re delaying paying suppliers because they’re waiting for payments to come in from their own customers.

Overdue payments and being offered longer payments terms could signal that your customer is finding the financial environment challenging. Make sure you have the right processes in place to get paid as soon as the payment is due.

There was a shock last week for the many small suppliers hoping to get back some of the £30million they are collectively owed from the online fashion retailer Missguided. Reports suggest they will get back less than 2p in the pound if they were supplying its main brand.

Missguided collapsed with debts of around £80million. The problem for unsecured creditors like suppliers is that they go to the back of the queue when it comes to getting their hands on what they’re owed. HMRC gets priority, employees get redundancy payments from the Government if there’s no money to pay them, although that may be less than their contract states, and secured creditors get paid. What’s left is divided up between the unsecured creditors like the small factories that have been supplying the goods. The talent that’s been keeping the customers happy and spending, are treated worst.

Online sales dropped back once the pandemic restrictions were lifted. High street shops regained some of their customers and the online retailers were surprised. Missguided wasn’t alone in seeing some of its customers return to the high street and sales falling.

It seems that some small factories were almost totally dependent on Missguided for business and they’re struggling to stay in operation.

It’s a desperately sad situation for small businesses that put their faith and business models into one big seemingly invincible customer. It sad for the businesses, its employees, their families, and the local communities in which they operate and which they support.

For small suppliers everywhere:

• diversify your customer base if possible so that if one customer starts to pay you late, or not at all, or offer you longer payment terms than before, you have others that you can try to do more business with
• call or email us at the Office of the Small Business Commissioner if you are waiting for payments for invoices that are overdue, and we’ll help you to get paid if at all possible.
• You can’t afford to wait. Your customer may be in trouble. If they aren’t they should pay quickly or given the soaring cost of doing business you may have gone out bust the next time they want to place an order. And bigger customers that aren’t in financial difficulty should remember that to the outside world looking in, any delay in payments may damage your reputation for being a good payer and make you appear to be in financial difficulty even if you aren’t. #PayDontDelay