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Learning from Recovery

The first in a series of case studies with lessons to learn about debt recovery

Oliver Cummings Aug 31, 2020

We launched Recovery three months ago into an unprecedented market. We have helped many of our accountants recover monies for their businesses and their clients businesses and we want to start sharing these lessons with you.
 
In the Recovery series, we will use current and past cases to highlight situations that could have been avoided with earlier action and hindsight. Through these learnings, we want to help you build a recovery service for your clients and get them the capital that they are owed and that is, so needed, for their business.

 

Example 1: Large supplier forces SME liquidation

The first case involved a construction subcontractor, contractor and a large multinational material supplier.
 
Our client was owed a legitimate sum of money for sub-contract works undertaken on behalf of their debtor (main contractor), who was withholding payment due to non-payment from the building owners. Our client agreed to wait for a period of time to allow the main contractor the opportunity to resolve issues with the owners however, during that period fell into financial difficulty with their supplier of building materials. 
 
The client had asked for leniency due to the circumstances that had transpired beyond their control however, the building materials company was unrelenting in their pursuit of the outstanding balance. A drastic but legal action resulted in a Statutory Demand being filed, swiftly followed by a Winding-up Petition.
 
All of the client’s money was tied up in this project, so they couldn’t fund a legal defence that may well have bought them some much needed time. The client’s business affairs are now being handled by the Official Receiver – effectively closing the client’s business and attempting to recover as much money as possible for creditors before proceeding into Dissolution proceedings.
 
As the Official Receiver was already involved we could not help, legal proceedings were already underway. However, we are still trying to help our client and have suggested that they negotiate with the Official Receiver to purchase the rights of this debt themselves for a nominal sum of money, which would enable them to progress this matter further. We also suggested that they speak to them about working hand in hand with the Official Receiver to try and maximise a recovery however this is unlikely at this stage.

 

Learnings 

If the case had been handed over before the Winding-up Petition, we could possibly have helped recover the money and pay all amounts due.
 
The key takeaway here is to check your client base for companies over extending costs on projects without payment, not progressing swiftly enough with action on recovery as they may face the sharp end of the stick from those you owe money too who won’t extend the same goodwill.  
 

If your clients need support recovering a debt or if you want to know more about adding Recovery to your firm's service offerings, just book in a call at a time that suits you. 

 

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