SGS specialise in commercial internal fit out services including dry lining, partitions and suspended ceilings. Operating through the East and West Midlands, they generally work under contract to larger construction companies. Projects include hotels, shopping centres and office blocks.
The big company challenge
A large regional construction company employed SGS to install dry lining, suspended ceilings and an external façade finish at a new office complex in Leicester city centre. The works were completed on time and to specification. The construction company’s quality surveyor signed off the works and an invoice for £38,520 + VAT was issued on 60 day terms as agreed.
After issuing the invoice promptly, sending a statement and contacting their customer a week before payment was due, the account remained unpaid 30 days after the due date. Despite originally agreeing to extended payment terms our client was still waiting for payment 3 months after completing the works. The result was a strain on cash flow which was affecting their own business’s ability to pay their staff and suppliers on time.
The final straw came when the construction company suggested a repayment plan and offered to hopefully pay the outstanding account in 4 equal instalments over four months. Advocate were instructed to recover the debt the following day.
The best course of action
Initial investigations showed that the construction company had expanded at a rapid rate over the last few years and was achieving a group turnover of over £200 million. Investigations also showed that their business model, whether planned or as a result of their growth, relied on extended credit from contractors and suppliers. All of the operating companies within the group paid contractors late, on average 62 days beyond terms.
The good news was that despite their practice of habitually paying contractors and suppliers late, none of the companies within the group had been issued with any County Court Judgments. Looking at their payment history we were sure that they would have been notified of the intent to issue proceedings to recover outstanding payments on many occasions. This suggested that they pay up as soon as they are confronted with any possible legal action which could affect their credit rating with suppliers and contractors, and ultimately their business model and future trading ability.
A successful result in 5 days
We received a telephone call from the company’s finance director just 4 days after issuing a Notice of Court Action by post and email to the group CEO. The amount to be paid including late payment charges to cover our fee was confirmed along with notification of a BACS payment to be sent later that day.
Advocate transferred the full amount outstanding to our client just 5 days after receiving the instruction.