Payment from a Cash Strapped Chemist

The pharmaceutical industry is worth upwards of £50bn in the UK alone. But that’s not all profit. Nor is it reflective of the cashflow pressures experienced over recent years. Here at Advocate, we have several longstanding clients in the industry and have noticed a marked increase in pharmaceutical instructions. Our client, in this case, is a testing laboratory with a modest seven-figure turnover. Last year, they onboarded a new customer specialising in the development and manufacture of medicines on behalf of larger pharmaceutical firms. Although technically a startup, the chemist was given 30-day credit terms based on investor backing and the calibre of industry talent recruited to lead the business. Until six months ago, it had been a prosperous relationship.

Unexpected Side Effects

The first sign of distress was when accounts payable became unresponsive. On reaching out at the director level, our client was informed that due to temporary cashflow issues, a payment plan was needed. Not unsympathetic, a duration of 12 months was agreed with token initial instalments to be followed by larger sums later. Having seen an exodus from the debtor’s board coincide with the first defaulted payment, the client feared the worst and instructed Advocate with the balance now at £6k.

Chain Reaction

We established contact with the chemist the next working day and struck up a dialogue to resolve reconciliation issues pre-dating the first instalment. After circling back to when the £6k would be paid, the debtor requested the previously defaulted payment plan be reinstated. This was instantly declined because had they of adhered to it in the first place, the account would not have been transferred to Advocate! After some debate, the debtor agreed to make two payments a fortnight apart to clear the debt plus £750 of statutory late payment charges. Although initially hesitant, the client agreed after discussing with us what court action might look like in the event of default.

The payment plan was successfully completed, with the debt taking less than three weeks from the point of Advocate’s instruction to the final instalment. This was also nine months ahead of the original payment plan. Shortly after receiving payment, our client was acquired by a rival business, which has since started trading with the debtor, albeit under stricter terms, including a bond held as security.