Food Industry Debt Collection of 11K

Advocate has successfully recovered £11K on behalf of a bakery and, in the process, dismissed the debtor’s spurious £15K counterclaim. Our client is part of a group of companies, each specialising in a particular type of flatbread. They sell into supermarkets under a well-known pitta bread brand and contract with other manufacturers to provide white label products and packaging. The debtor, and target of our action, had used the client’s pitta and packaging services for most of their 13 years of trading. The relationship had been prosperous for them both. Unfortunately, goodwill went up in flames when the debtor flatlined on communication and payment of two invoices.

Needing Dough

For some subsidiaries, carrying £11K at 60 days overdue would not be a major inconvenience because the parent company would cover it. Our client was in a different position because the group’s shareholders have little appetite for subsidising a subsidiary. Advocate has worked with the client in recent months to reduce 30-60 day debts, much to management’s approval.

Having not responded to our client for 2 months straight, the debtor immediately made contact upon Advocate’s instruction. From experience, we know that raising a dispute at the 11th hour is either going to be a delaying tactic or prompt us to repudiate a nonsensical query. In this case, the latter was true. The debtor was willing to pay the £5K invoice but wanted approval to apply a credit note-taking less than £50 off the balance. Never before had the manufacturer wanted to write an agreement to use a credit note they were entitled to use? With Advocate’s reassurance, the first invoice was paid.

Taking the Pitta

The £6K invoice presented its symptoms of non-payment for a couple of reasons. The first is a quantity discrepancy. In a testament to the god of overcomplicating matters, Advocate had sight of Excel spreadsheets comparing contractual volumes with those ordered, delivered, counted, spoiled and taken off the purchase order. It also considered the ratio of white-label packaging to pittas. The debtor’s manual keying in of glorified spreadsheets was no match for our client’s system showing a clear audit trail from order to production, delivery and invoice.

The second issue was that of spoils or alleged mouldy pittas which the debtor sought to counterclaim £15K for reputational damage. On presenting this to the client, they quickly evidenced an agreement in place on which to dismiss the counterclaim. In short, because this variety of pitta bread has a short shelf-life, the debtor had agreed no claim could be made against the mouldy products. We also confirmed the unit cost had been lowered to help offset any inedible product that the debtor could not resell fast enough. Despite the trading relationship is worth some £100K per year, the debtor seemed willing to destroy it over some spurious queries. Our client was very much the aggrieved party, having held space on their production line to accommodate the debtor’s impending new product, which of course, never arrived!

Proving Ground

With barriers on the £6K removed, the debtor promptly paid. Next, they took issue with the statutory late payment charges sighting their own interpretation of The Late Payment of Commercial Debts Regulations 2013. Needless to say, the resistance didn’t last long, and Advocate received payment before closing file on another successful commercial debt recovery. In our final pun, one might say it’s a pitta the client was inconvenienced so much by the debtor’s floury behaviour!