Picture: The Guardian
Danger sign for suppliers: when a customer changes payment terms to 90 days and beyond (as Thomas Cook did before collapse)
It all began in 2014 when Thomas Cook extended its payment terms for suppliers to 90s days. In 2019 it went bust owing suppliers £1.75 billion. It’s total liabilities to customers, banks and lenders was £9 billion. Only between £176 million and £244 million is likely to be recovered by the administrators according to the Insolvency Service who published the eye-watering figures this month.
Ian Carrotte of ICSM said the extension of the payment terms in 2014 should have been a red light to suppliers. He said: “From the window cleaner at their HQ to the fuel companies and airports, an alarm should have sounded. A similar extension was announced by Carillion when they pushed their payment terms to 120 days and even boasted about it on their website by effectively saying suppliers should have comfort in trading with such a solid company. If a company is solvent there is no reason why it cannot pay on 30 days. Yes there can be special arrangements but if a firm suddenly pushes the limit out to months then stop trading with them as there is something wrong happening.”
The Insolvency Service said that total estimated asset realisations of up to £244 million excludes the costs of realising the assets. They said: “Those realisations to date include the sale of retail outlets, aircraft landing slots, intellectual property rights, subsidiary and joint venture businesses and the collection of currency and cash from retail stores.”
Ian Carrotte said it was a classic case of a company that had borrowed and borrowed with debts of £9 billion which they could not service. He said: “Carillion owed £1.5 billion to lenders, Debenhams owed around a billion in loans and debts, Arcadia had debts of around £750 million while Liberty Steel owes around a billion or more depending on how you add up the various Gupta companies. Essentially these type of debts make a company unsustainable and although not many tears are shed when banks lose out it is always the suppliers like printers, hauliers and stationers etc, plus the staff who pay the price.”
Although this chart was published by the Government in 2018 it gives an idea of the continuing problem:
| Company | % Invoices not paid within agreed terms |
|---|---|
| GRAINGER & WORRALL ENGINEERING LIMITED | 96 |
| PARTS ALLIANCE GROUP LIMITED | 95 |
| GRAINGER & WORRALL MACHINING LIMITED | 93 |
| CLIPPER LOGISTICS PLC | 92 |
| ASHTEAD PLANT HIRE COMPANY LIMITED | 92 |
| W & J LINNEY LIMITED | 92 |
| TNT EXPRESS ICS LIMITED | 91 |
| BOUGHEY DISTRIBUTION LIMITED | 90 |
| MEDTRONIC LIMITED | 89 |
| SIMMONS & SIMMONS LLP | 89 |
| Source: Gov.uk 11 January 2018 |
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk