Chasing business debts

Case study

Bill Conroy is the owner and manager of a mid-sized catering supply business in Lancashire. A significant proportion of his business comes from a single customer, Burleys Bakeries, but he also supplies several other local businesses. He is currently negotiating a deal to supply a new business - Frank Morrison's fast-food eatery in Cumbria.

Conroy's business is doing well and is capable of coping with the increased demand a new contract will bring. This new business is previously unknown to Conroy, and Morrison is pushing for credit terms. As Conroy is doing so well he allows the request for credit, even extending the terms in order to gain future custom.

Six months later Conroy is experiencing some cash-flow problems. These are mainly caused by Conroy's single largest customer, Burleys Bakeries, which rarely pays invoices on time.

Conroy is reluctant to upset Burleys Bakeries. He knows that it will have no problem paying the debt, but he has not pushed the issue of interest for late payment as he does not wish to lose its future business.

Morrison has also failed to make any payments at all. Conroy has heard rumours that he is having difficulties paying Customs and Excise and may be unable to pay any of his debts. On top of this, Burleys Bakeries has since taken delivery of another order on credit even though he has still not received payment for its last order.

Conroy has several demands from his own creditors. On paper there is sufficient money to pay them, but due to the bad debt incurred through the Morrison deal and the constant late payment problems with Burleys Bakeries, he is unable to pay. As a result the bank is considering calling in all of his business loans and he is in serious financial trouble.

This case study is a work of fiction and consequently the names, characters and incidents portrayed in the article are fictitious. Any resemblance to actual persons, living or dead, events or localities is entirely coincidental.