A recent case highlights the need to:  (a) get contractual details confirmed in writing and (b) arrange security to cover what you are owed.  A supplier of industrial equipment received an order worth over $300k.They proceeded with the supply and installation without having any written contract with the purchasing company or any personal guarantee to protect them should the company turn out to not have sufficient funds or assets to meet the debt.

During the installation process it was discovered that not only had the purchaser made no payments for the machinery, but that other creditors were chasing the company for payment as well.  The supplier was understandably concerned that they would lose $300k and sought our help.

1. The best way to deal with bad debts is not to have any at all.  This requires having the right systems in place including regular book keeping and stringent credit checking.  Policies of payment in advance or payment of deposits should be strictly enforced.  Proper agreements, including where appropriate personal guarantees as security for payment should be obtained from the outset.
2. In reality, every firm some times has bad debtors.  Create clear process for dealing with bad debts.  They must be identified and dealt with promptly.  Early attention to debt recovery is vital to its success.
3. It is crucial to follow through with the process and have dedicated persons dealing with the situation urgently.
4. In the event that internal steps do not work, have an arrangement with debt collection professionals who can then follow through all appropriate steps promptly.
5. Lastly, ensure that you have clear processes for identification of bad debtors to avoid doing further work or providing further services for them in the future.

When approached to assist the above supplier we were able to obtain acknowledgements of debt and personal guarantees to provide security for payment.  We were then able to recover payment in full plus costs for the client – much to their relief.