When Phillip Hammond delivered his budget this week, there were many areas that were given the ‘thumbs up’ by SMEs, the FSB Chairman, Mike Cherry, even labelled it as ‘small business friendly’.
However, there is one part of the budget that we need to bring to your attention – HM Revenue & Customs will have priority over you and your business in the recovery of funds when a business goes bust. It means, that you, as a supplier to any business that fails, will be ‘bumped’ down the list of organisations queuing to be paid.
The Government’s HMRC has reinstated its ‘preferred creditor’ status, giving it priority in recovering losses. It’s a pecking order, starting with the preferred creditors – like the HMRC - the insolvency practitioners, employees, and finally the unsecured creditors – you!
Fact: A business operating on a 5% net margin will need an additional £200k in new sales to recoup £10k bad debt.
Question: Where do you find £200k new sales?
The chances are you’ll never see the money you’re owed again, and if you do, it could take years. So here’s how you take back control, protecting your business against your customers going bust. You take out Bad Debt Protection (BDP). At Calverton we can provide easy access to BDP as part of our finance facilities. This is a protection policy that allows you to cover your entire ledger against loss or you can choose which customers to cover with a Selective Bad Debt Protection cover. For example, you can protect yourself against your largest, most profitable customer going wrong.
This gives you peace of mind that any unpaid invoices, or insolvency issues, do not put your own business at the risk of the same fate through non-payment.
What happens if your customer goes bust and you have BDP?
In the unfortunate event of your customer going bust, leaving you with unpaid bills, our Bad Debt Protection means we will recover 90% of each outstanding invoice value. You are also able to reclaim the VAT on these unpaid bills separately from HMRC. What’s more, you’ll receive our Bad Debt settlement pay out promptly, so you do not risk missing your own supplier payment commitments.
With the great unknown of Brexit and the changes in the global economy, protecting your business in 2019 is paramount.
For a guaranteed cashflow, protection against customers failing and 100% peace of mind contact us on 01908 268888.