Business Insight 103 – Insuring Your Debtors (blog & vlog)


The accounts showing the £1.1 million loss are published, and all of our major suppliers phone to speak to me. Their insurance cover for our indebtedness to them had been withdrawn and they weren’t happy.

Francis Madden phoned; he had told me previously that our debt wasn’t insured (he agreed that he had said that), but his new FD had arranged it without telling him. We owed £400,000 and he wanted £200,000 immediately, and could I arrange for a charge against my house to secure the rest? I hope you can imagine what I said in response to that.

We got 3 lorries a week from them containing 300 windows and doors, which were then immediately turned into cash through the course of the fitting week. Fredericks were sent a cheque for whatever they had supplied 10 weeks previously. If they didn’t supply the windows that process would stop, and we would probably be sent bust by the bank or some other smaller creditor – and he would lose £400k.

I further told him that, in the meantime, I would reorder the UPVC windows from another supplier who had been courting us on commercial contract supply, who also happened to be cheaper than them and who had also lost their insurance but didn’t care. They wanted our retail throughput, as it was big and regular.

If we survived the change of supplier process, we would eventually be able to pay them off no doubt, but they would have lost their biggest customer.

There was some more argy bargy, and very blunt Yorkshire stuff, but the lorries kept on rolling and he kept getting his weekly cheques.

INSIGHT 103:- Companies will seek to insure your debt, but it costs a lot of money and in the end, our suppliers took the risk themselves. Only this one really counted though, and I did have a long and good relationship with him and I didn’t let him down. Asking for my house was ridiculous as it was owned by me and my wife, and she definitely would not have signed it away (even if I had been stupid enough to do so).


In the meantime, we had taken on our own fully-qualified accountant, Christopher Martin; he was obviously aware of our plight but grateful for the opportunity. He had spotted some further negative bits and bobs (about £50k’s worth), which KPMG had missed. I said to write it off over the next 6 months or so on the management accounts.

The windfall from Bowater was very useful: KPMG wanted us to take the profit over the 4-year life of the license, and so only at the rate of £75k per annum – bollocks to that. They weren’t going to get it back whatever (as it was spent); they probably owed that much for one year anyway. In the end, we agreed that we would write off the computer development programme (£100k) and include other overlooked assets (without depreciation and capitalisation policies), if they allowed us to take all of the £300k as profit. Deal.

Turnover: £4.7 million, net profit: £130k, net worth: £-270k


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