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After the small software house and Apricot* dealer I worked for had gone out of business and been taken over I had an early issue with the new finance director** who'd either failed to understand, or ignored, the fact that service contract payments had to be up front. The customer had paid for their contract renewal but she sat on the invoice from Apricot. 4 weeks after the renewal date the customer called us requesting an urgent service call which, of course, Apricot declined to attend as they hadn't been paid. Fortunately it was only a failed keyboard so I was able to package one up and send it overnight to the customer, telling them it would be quicker that way than waiting for an engineer.
The FD was very fortunate, her delay in paying only cost us for a keyboard (still not cheap back then) and overnight shipping. Had it been something more serious we'd have had to pay for an off-contract service call at extortionate prices, more critically it would likely have trashed the reputation of the operation just as it was getting going as our customers tended to know each other.
*It was a long time ago!
**A similar failure to pay a relatively small bill sent the whole business into administration a few years later. The transport company concerned skipped taking us to court and went straight to a winding up order, although that could probably have been defended the bank lost confidence and pulled the plug, The company had been valued at over a million pounds and was taken down by an invoice for just over a thousand.
Many small companies survive entirely on bank loans for the first few years. They have to bu/rent premises, fit out [work-]shops, pay staff, taxes etc. All up-front costs before a penny comes in through the door. And as the OP says "could probably have been defended the bank lost confidence and pulled the plug".
A winding up petition here in the UK is a commercial nuclear missile - ignore it at your peril!
Its been many years (decades) since I worked in banking, but as I recall the implication of a winding up petition (if it subsequently becomes a winding up order) is the bank is at significant risk of being liable to the company liquidator for any payments or funds received both into or out off the subject company account post petition issued date.
Upon learning of a petition - they must be advertised within 7 days of issue in The London Gazette (now known as The Gazette) most banks will immediately freeze the company bank account(s) to protect themselves. Unless the subject company has good lawyers and can swiftly revert to the court this essentially kills the business stone dead.
However its not all one way, as the petitioner has to provide an undertaking to the court to pay for any damages consequential to a failed petition. E.g petition issued, bank freezes account, company fails, petition dismissed - petitioner on the hook for a very big bill.
As with most things in life there are options, but they come with consequences and must be carefully considered. That said if you have a genuinely due debt, its certainly a way of becoming the (debtor) companies number one priority.
A winding up petition here in the UK is a commercial nuclear missile - ignore it at your peril!
It's supposed to be. It's a way of ensuring that suppliers get paid, as with a nuclear missile the threat of it being used tends to have the effect desired without having to resort to the use of the weapon of last resort.
To obtain such a court order you've got to write to the target and warn them that following your previous letters, your going to seek a winding up order if they don't pay up within 14 days. Therefore, the simplest method of defending yourself is to pay the supplier before it goes to court.
Although if it did go to court, paying the money before the hearing date would be a bar to any order being made by the judge as your defence would be "we've already paid them" and so the case would have to be dismissed.
If a company owes you 750gbp or more you can apply for a winding up order. You should get an immediate response. The fact of a winding up order (successfully or not) will cause other companies, suppliers to ask questions. They'll put different payment processes in place.
It can happen. A friend of mine was in a family business which had a decent portfolio of small companies - import/export, plant hire, wholesale chain management, bulk storage, etc. But they were structured together in such a way that when one small part of the organisation started struggling, no mater how strong the rest were, it brought down the whole lot.
> How does a small bill like that send a whole company into administration?
English bankruptcy law is tough. Look at how Rolls-Royce got Bentley. Different times and economics, true, and the story is told differently from different sides, but instructive. In the beginning of the 1930s Depression, everybody was late paying suppliers. Suppliers knew you could not squeeze blood from a turnip so sat on debts. But (I have heard) one supplier got desperate and sold pver-due Bentley notes to an agent. Again fairly routine for the time. But this agent was (allegedly) working for Rolls-Royce. Someone took the paper to a judge who ordered Bentley turned over for "winding up". Dog-fight! RR paid off Bentley's debts, and hired W.O. basically to keep him idle, non-competing. OTOH most car-makers collapsed in the Depression or the chaos of the next war.
Not to pick (as I bloody love WO discussion turning up in random places I'm not expecting it) but I understood that Rolls purposefully "said the quiet bit out loud" about keeping WO idle, but in reality he was always a better engineer than a businessman or self-publicist. We got ~10yrs of magic and if I wouldn't need it to make use of it, I'd give my arm for a Cricklewood. My understanding was that Rolls actually wanted the engine tech that WO had developed and, whilst part of taking Bentley as a marque protected them from the splitting of their client base, WO was put to work making Rolls' designs better? Rolls were happy with this arrangement as they looked savvy, indifferent and composed, and WO got to remove most of the stress of the non-oily bits of his work life whilst his lineage continued and the financial matters sorted themselves.
> How does a small bill like that send a whole company into administration? Was their liquidity really that bad?
I worked for a company like that for around 9 months in the mid 1980's that was is such dire straights that towards the end of the month the accounts would go around all the jobs under way for anything remotely possible to invoice the customer just to keep going.
Once at the stage the company is in terminal decline and eventually not enough is found and the administrators get called in. Thankfully I had a nod from a mate at another place and switch jobs.
Turned out that the Directors had done a buyout a few years earlier and mortgaged their homes to finance it, and with one exception (the fall guy who was not part of the gang) they had all quietly funnelled the company cash to pay them off leaving it without enough to keep going.
Had similar years ago. Many renewing services were invoiced a month in advance for auto-renewal, originally so the customer had a reminder about it coming up and could if need be cancel the service before the renewal date hit (and would then get the invoice cancelled via a credit note obviously). When the company was a bit desperate for cash that was stretched to 2 months in advance just to get some more cash in (or increase the money owed value in the accounts), then finally (not long before the company went belly up) that was stretched again to 3 months.
Yeah, the sort of "trick" that is (usually) a one-off in the hope things will pick up. I worked for a company where we got paid on the 28th of the month. Then one year they change the pay date to the 1st of the month. It doesn't seem like much, but it moved an entire months wage bill into the next financial year, which saved the company from going under during an especially bad patch. But that really was a one-off and in that case actually worked. It was, IIRC, only an issue for a couple of staff who were living from one pay-day to the next and got stuck with some bills being due between old and new pay days and the company paid them some extra the following month "for the inconvenience". This was some years ago and according to Companies House, they were "dissolved" in 2016, long after I'd moved on.
The bit of UK Public Sector I work in has a target to pay x% of suppliers within 3 days of receipt of a valid invoice (I can't remember exactly what x is, but it's >95%).
This target is monitored and people are chased if the any of the few invoices that aren't handled automatically look like they will miss it.
In the past I've dealt with small companies where we are the first Public Sector organisation they have come across, and the look of delight and wonderment on their face as you tell them they'll be paid quickly and reliably is quite something to behold.
Government has its faults, but we do pay our bills.
[posted Anon as a Civil Servant shouldn't have public opinions]
You didn't reply to the OP's story, but to a comment which made a general point about bills. That is the context in which I replied.
Theoretically I agree with you that if you owe money, for example to pay a bill, then you should consider it to belong to the creditor.
In practice, there are dishonest people in the world who will withhold payment until forced to pay up, sometimes in the hope that it won't be worth the creditor's time and possibly money to make that happen.
In practice, there are dishonest people in the world who will withhold payment until forced to pay up
Not just people, global household name companies, as a former employer, a boutique consultancy, found out when screwed by a client ducking out on a £2mn bill; peanuts for them, layoffs for us, as we couldn't afford the legal fees.
Even delaying paying an invoice, say, taking 90 days instead of the contractual 30, can send a small firm under, but for the big boys, it's just standard practice.
Chapeau to those public/non-profit sector orgs that pay up on time.
Place I used to work for did something similar; Customers generally did either pre-pay, payment due when job is finished, or at best NET 5 for invoicing. From their suppliers, they wanted net 30 or 60, and would pay on the evening of day 30 or 60; They had a problem keeping suppliers, because they all got tired of the beancounter who was doing that.
Place I'm at now is MUCH better about paying it's bills.
I had a customer who was doing that (large mail order clothing outfit).
Griping about it to a friend resulted in a massive change in policy. It turned out he worked for the company and brought it to the attention of the board of directors, who were horrified upon investigation to find out their financial controller had instituted it as policy and promptly sacked her - just in time as it turned out, because several large suppliers were preparing to fire the company as a customer due to the tardy payments
The BOD ended up firing several of the top management following that. Investigations showed that a culture had developed that they didn't like (Company was owned by 7th day Adventists) and was fundamentally incompatible with their core beliefs.
Not "ducking out" but CFOs that see fit to push the limits of credit agreements in order to make their metrics look better. The "it's earning interest for me in my account" and to hell with the morals approach. Recently had a CFO who eschewed NET30 for EOM90 (meaning an invoice dated 2nd Jan wouldn't be paid until the end of April and wouldn't clear in their account until early May. As I left he was shoving out to NET120. More often, he'd decide a payment run was "too large" and shove stuff to the following week to "apologise for the oversight" if contacted about it, and sometimes this would be for several weeks past. Didn't matter that the company was sat on the cash reserves to clear it all, didn't matter that we'd frequently have to fight for ceased services or being on-block.
He and I didn't see eye to eye. I don't complain with him playing games like that with Dell or Amazon, but I took great issue with him applying that to the small sole-trader that did network cabling and alarms, or the sole-trader that fitted our self-sourced boardroom equipment. The thought of the impact of his antics on our smaller suppliers and their families (particularly in the run up to Christmas) made me feel physically sick. He on the other hand seemingly slept well regardless. I'm not a religious man, but I'd love for him to have to face the consequences of his actions.
Having moved jobs, I now have a CFO who holds NET30 as an absolute and a CEO that actually shouted at me when I couldn't bring the expenses system back online quickly enough in early December because he couldn't approve new staff expenses. I love this - he was upset he couldn't pay his people and absolutely had the right attitude. Didn't matter that the fix wasn't (quite) me, I rank the calibre of the man for that being the most upset I've seen him.
But employing people to ensure public sector bills are paid swiftly, and contracts are agreed frugally seems to attract ire from various gobshites bemoaning "useless bureaucrats". They're not, they hold external suppliers' feet to the fire to ensue value for the taxpayer. The stories of waste that make the press are the exceptions, or ones where there is actual malfeasance.
But employing people to ensure public sector bills are paid swiftly, and contracts are agreed frugally seems to attract ire from various gobshites bemoaning "useless bureaucrats".
Unless they're NHS administrators, in which case they are the very definition of "useless bureaucrats". A friend was recently discharged from hospital at 7am, her lift was waiting to take her home. At 4pm she still didn't have the signed papers that would have allowed her to leave, so she was occupying a bed that should have been available for another patient. Same for another friend who spent hours waiting to get papers signed for prescription medicine, until eventually the ward sister took the papers to the person in question and stood over them until they signed. That sister needed the bed back.
One can always find an anecdote about certain individuals' poor performance and use it to denigrrate an entire class of people. Does Beverley Allitt represent all nurses? Paula Vennells all Post Office staff?
NHS administrators I've known have been ridiculously overworked, keeping clinicians free from paperwork burdens (purchasing, performance/outcome stats are not things a surgeon needs to be focusing on), and fighting for their particular Trust in the face of overwhelming demands.
The ire should be focused on that small percentage of corner office numpties who think their private sector genius applies equally to public sector, bringing inb consultants suffering from the same "private sector good, public sector bad" myopia that's been about as helpful to the NHS as MRSA.
Back when I was in DoH as a young appdev, we had a contractor on our team, fresh from being 'released' from a spell at, yep, Royal Mail. I and my boss had prepared a business case for a small piece of work and passed it to him for his thoughts. His first comment was "yes, but where do you make the profit?" In a central government department. After a substantial conversation, he still couldn't understand why our team wasn't charging another part of the same government department an overhead to bump up our "revenue". We didn't renew his contract (also, I ended up teaching him sttuff, which wass the opposite of why he was brought in in the first place).
My point is that the NHS relies on a vast number of people in all sorts of roles, and all of them understaffed and undermined. Yes, mistakes happen, some of them fatally, but none of them, or at least, barely enough to register statistically, driven by an attitude of "ah, fuck it, that'll do", can't be arsed, lack of effort.
Absolutely. The last thing* an overstretched NHS medic needs is someone telling them that their limited amount of admin support is somehow unnecessary and will be removed.
I worked for years alongside NHS (Speech and Language/Occupational Therapy and sensory impairment ) staff and and my daughter is one- that little bit of admin support they get is a life saver
*Probably not the last thing, because there are many worse, if somewhat more unlikely- (but then again who knows what a cost cutting politician seeking headlines would get up to....)
There's a tendency for the most sociopathic suckups to end up in top manglement positions regardless of government/corporate environments
They're very good at hiding issues from the higher-ups whilst usually making life hell for the lower-downs and crucially, they almost always tend to hire their friends - which can be a good "tell" of issues when analysing an organisation's structure
They're also usually the most relentless publicity hounds (narcissism, etc) and can't pass up photo opportunities
A lot of the stories of public inefficiency are wilful misunderstanding. Hospitals do need all that admin staff ( not managers, but administrators; there's a difference) and not just the "frontline" doctors and nurses. Because you don't want a consultant wasting time doing routine admin, or a nurse wasting time ordering in essential supplies. Or a doctor sending out appointment letters. And if a patient on discharge is kept waiting, it's hardly "useless bureaucrats" since the bureaucratic work was waiting to be done- it's more likely very useful but insufficient number of bureaucrats.
Not surprised at all - all south-western European countries are like that, some more than others.
A friend of mine swore never to do any work for the public sector anymore after almost being left bankrupt by late payments. Although the contract stated a 30-day pay delay, some of the invoices took more than 6 months to be paid, which, for a small company, were really hard to handle. And you cannot sue, as, per law, the state is a bona fide debtor.
You can't sue but you can require payment upfront and if you word the contracts right, you can sell it to a debt collector for nearly 100% of the outsdtanding value with costs and collection fees added by the debt collectors
At that point it's no longer your problem and you CAN'T take payment even if the financial controller is desperately trying to pay the bill in cash at the front office (this is a common desperation tactic when the debt collectors show up with a 400% increased bill and the ability to start removing office equipment)
Yes, I've had experience with this. Selling on a debt at 10c in the dollar or less is a mug's game.
It's all kinds and sizes of businesses, unfortunately. We just received payment for a fairly substantial bill from a world-leading, highly profitable, billion-dollar company that was seven months overdue. Took us ages to hunt them down.
I honestly don't know why we still do business with them.
Our company was taken over (rather, we sold it....) to a much larger conglomerate. It should have been a good assimilation, we had a good product which could be significantly expanded, apparently, they had the expertise to develop it. Especially on buying power; they obtained big discounts on products we used/incorporated. Unfortunately, their 'Standard Terms' were 60 days for payment and they never paid before 90 days.
They staggered in disbelief to find out that we were buying products with at least the same discount. One of their premises for buying the company was the savings in bought-out products: At least 50%. It turned out that a lot of items we were buying at much better prices, discounts, delivery and support. We used to pay our bills on time..... Along with that came goodwill..... Obviously, we were doing it wrong.
"It should have been a good assimilation"
There's nothing like a new owner to balls up a perfectly functioning company or product ...
Back in the day, two newly merged start-ups needed WWW presence, so they paid me a good deal of money for mine (an early so-called "portal"). Then promptly ruined it, and got bought out themselves. The proud third owner of said portal begged me for help. I fixed it in their image (for founders stock in the new company + cash), and once I was done, they promptly sold it for an astonishing number, considering what it was. We all made bank, and I'm not complaining here ... but naturally the new owners broke my work again. They begged me to fix it, but I refused. Been there, done that ... and was comfortably already pseudo-retired on their dime.
The tightening up of bill payments and requiring large organisations to publish date about bill payments is one of the few good things Westminster has done for small businesses.
Although I have worked with a number of small businesses who sign contracts with government and large businesses and fail to get a purchase order. Alternatively, don’t follow the instructions on the purchase order and send the invoice to their contact instead of Acccounts - Then wonder why their invoice either gets rejected or disappears into a void and doesn’t get paid…
The worst I had was a contract was issued by a local authority, but for various reasons did not get a purchase order assigned. Follow a reorganisation and some overspend, it was found the contract had not be sent to Accounts and so set against the budget and thus the council had no money to pay the invoice…
We had the opposite problem. One of our long-time clients got a new finance director and she was absolutely awful. Incredibly demanding, everything had to be done yesterday, didn't like the colour of her new keyboard so demanded we bring her a different one immediately. That was within the first 2 weeks. She would also critique every part of invoices and defer payment well beyond agreed terms.
We spoke to the company owner (her boss) and simply said that she was the worst person we'd ever had to deal with and if it continues we'll have to stop providing services to the company. Apparently we weren't the only ones to complain and she was gone within the week.
Had a CFO at one place who was like that. Demanded all company credit cars be cancelled barely a week after starting, and that all purchases had to be done via invoice. Fair enough but one critical supplier didn't support invoicing and without them a company of over a thousand people would effectively grind to a halt.
Reportedly his response was to bark "That's not my problem" when this was being explained to him by the IT director. Thankfully within the month he was gone!
There's something incredibly sad about a 50-something year old overly fat man effectively describing himself as a "arse-kicker" and treating everyone else as if he was some kind of hard case when stomping around the office.
My grandmother could have likely beaten him up and she's been dead for over fifteen years.
While I can't speak for UK law, the situation in Australia is...
In an Australian company wind-up, "preferential payments" are voidable payments made to a creditor in the six months before liquidation, giving them an unfair advantage over other unsecured creditors. A liquidator can demand the repayment of these "unfair preferences" to ensure a more equitable distribution of the company's assets among all creditors. The six-month period can extend to four years if the payment was made to a "related party"
In other words, even if you managed to get payment before the debtor went under, if the liquidators can show that you had a reasonable suspicion of the debtor's situation, expect a polite request to hand over the cash.
Slightly off topic here, but:
I'm a fan of Randy Couture. An impressive and accomplished athlete, and he seems like a genuinely nice guy. However, my favorite thing he's done was when he donned a tardigrade suit on Bill Nye Saves the World (S01E05) and states, "Nothing can kill a Tardigrade! ... ... Except a broken heart!"
"It goes to show that the same mentality that works in the oilfields does not work on the IT world,"
I suspect that this bloke had moved to a different industry for a reason. Obviously there's good money to be made in the short term by padding bills and delivering substandard kit. But the oil industry tends to be quick geographically concentrated - and so I suspect is a bit of a small pond, in which everyone eventually gets to know everyone else. So there's probably a limited amount to time that you can get away with certain practises before you've got to either leave the industry, or go somewhere else a long way away. Unless you stay in the big companies that can't be avoided, and can camouflage your shenanigans as mistakes and have them hidden amongst the normal transactions.
This all reminds me of a guy I worked for when I was in radio. Similarly, he was a Texas oil millionaire who decided to buy up a small chain of radio and TV stations.
I was told that he kept his own personal jet pilot and copilot on the station's payroll as "accountants," which in my opinion is a bit shady.
I think at least one of the stations incurred a massive fine from the FCC for allegedly rigging a contest involving a trip to a resort in Mexico and then stiffing the winners on the bill.
Oh, and when they fired me, my final check bounced.
Nice people doing nice things.
I think if we're being really pedantic, there have been some canard jets which could be counted as fore-and-aft biplanes. There are also at least two one-off jet-converted biplanes used for aerobatics: https://www.bbc.co.uk/news/av/uk-england-hereford-worcester-64788578
https://eaavintage.org/the-screamin-sasquatch/
I was once tempted to apply for a winding-up order on the BBC.
Much earlier, in the 1970s when I'd been a BBC employee, I'd been unable to order essential parts because the Corporation was blacklisted by some big suppliers for very late payment.
When Greg Dyke was appointed Director General in 2000, having been on the receiving end, he made the BBC pay on time. But AFAIR my experience was after he left.
One of my previous companies provided services to a company which was run by a notoriously bad payer. Turned out that the company was in special measures and the bank would only let them pay a certain amount (value) of invoices every month. I started digging around in companies house and found out that the owner of the company was a director of a whole network of companies, the one which we were working for had a balance sheet £19M in debt. One of the other companies in the group on the other hand had £19M in cash!
Being a director of our small company (11 people total) I politely informed the owner of said company (who I knew), that unless we were paid within the 30 days in our T&Cs we would withohold any outstanding work and would not work for them unless the outstanding debts were cleared within the next 30 days. As we were working on some major oil and gas projects in a certain foreign nation, for a final client part owned by the government of that nation the manure hit the gas turbine.
A phone call was made to us, which went on speaker phone in the office with my fellow director sitting next to me and the terms were re-iterated.
We got paid but shortly afterwards decided to stop working for them having got work with a UK government agency who paid on time.
They lost the O&G contract as a result (worth over £2M in 2005) and never spoke to us again.
We didn't miss them.
I worked for a US tech company that suffered a boardroom coup in the aftermath of the dotcom bubble bursting. Our little corner of the 700-person business had just 14-15 employees but our stuff contributed ~25% of the corporation's net profit. Even better, we were growing fast (60%+ annual growth) and consistently, with our key metrics above average. What's not to like? For the sharp-suited hotshot new CEO arriving by parachute, everything. He shut down our operation, moved the remnants to China and proclaimed it was "a perfect example of business Xxxxxxx Corp shouldn't be doing".
All the customers, sales and profits were gone in a couple of years, but not his job, despite him being "passionate about accountability". No happy ending on this one. Xxxxxxx Corp is just someone else's brand now.
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