In most cases where the client is also a customer of the debtor, it makes sense to deem both ledgers independent and unrelated. For example, the supply of ping pong balls has little relevance to buying bananas. This particular case saw an exception made on account of the goods and values involved. Our West Midlands client is a wholesaler of industrial and construction signage. They had billed just over £100K of signs to a highway maintenance contractor, with the oldest invoices now seven months overdue.
Taking a pragmatic view and knowing £100K was a significant sum to their Wolverhampton trading partner, it was deemed appropriate to apply a contra of £52K owed by a sister company trading independently with the highway contractor. That contra had only been billed in recent weeks, but our client seeing the bigger picture, did not want to compromise what was proving to be a mutually beneficial supply chain. Taking the moral high ground is not always an easy decision, but in this case, it made commercial sense. Having been incorporated in the same year, IBM’s Deep Blue first won a game of chess against Garry Kasparov (1996). Our client has made a habit of not overvaluing their worth to any customer or supplier. Unfortunately, the debtor mistook integrity for tactical weakness.
Striking the Right Balance
Having had a string of broken payment promises, the wholesaler paid a national chain of solicitors to issue a generic debt collection letter. When the deadline passed, they quoted an eyewatering sum to commence legal proceedings. Our client is no fool and rightly explored other options. On reaching out to Advocate, one of our Case Managers took the time to discuss and review their predicament. With Advocate’s trade mark transparency, the client was also able to explore the what-if scenarios and costings of legal action in the unlikely event our action did not yield full payment.
With all information in hand, along with copy invoices and a lengthy statement of account, action commenced for the £48K plus £3.5K of statutory late payment charges. On making first contact with the debtor, we reaffirmed that having defaulted on a payment plan already, no such offer would be repeated. We then took to our client a list of disputed invoices and the blatantly spurious reasons for contesting them. Such is the audit trail of our client’s sales ledger system; they quickly provided us with POs and PODs to support the invoices. With nowhere else left to go, full payment of the £48K after contra, plus the statutory late payment charges, was received on day 7 of our action.
Both the client and their sister company continue to trade with the debtor, albeit with a much greater focus on paying invoices on time now!