Customer or supplier in financial difficulties

Customer or supplier in financial difficulties

5 October, 2021

The Dutch government will withdraw its generic support measures with effect from 1 October 2021. Just a small number of specific sectors will still be able to rely on financial support. This could mean that companies that have been able to keep their heads above water thanks to the coronavirus support measures will now go under. Are your suppliers and customers in a position to continue to meet their (financial) commitments? Stay alert! Worse scenarios can be avoided through the early identification of possible problems.

A change in ordering behaviour by customers

Watch out for a change in the payment and ordering behaviour of your customers. If customers start to have payment problems, you will probably notice this in the payment terms stipulated. A change in ordering behaviour can be a sign of problems too. For example, faster orders or orders for much bigger quantities than usual. Don’t let the outstanding position get too high and keep an eye on credit limits. Consider asking for payment in advance or breaking big orders down into partial deliveries. Difficulty contacting a customer and repeated excuses can point to problems as well. Be aware!

Customers: actions and points for attention

What do you need to look out for in terms of customer behaviour? Several actions and points for attention follow below:

  • Know your customers and only do business with customers that are reliable;
  • Consider taking out credit insurance;
  • Regularly check the creditworthiness of customers, set credit limits and stick to them;
  • Supply goods subject to retention of title and repossess any goods that a customer has not paid for if there is a risk of it going out of business;
  • Be alert to a change in payment and ordering behaviour and communicate about both with the customer straight away. You may be able to help your customer by sharing your thoughts and ideas with it and by temporarily granting it additional financial scope without affecting your own position.

 

A change in the supply behaviour and financial conditions of suppliers

Pay particular attention to any change in the supply behaviour of suppliers and their financial conditions. Is a supplier supplying regularly and on the supply dates agreed? If not, which reasons are there for these irregularities and are there any indications of financial problems? For example, are payment problems preventing a supplier from obtaining the raw materials it needs on time?

Is a supplier asking for different prefinancing or deposits? Only comply with requests like this if there is a good reason for you to do so and make sure you have sufficient assurance that the money will be used for the production or supply of your orders.

Customer or supplier in financial difficulties

If a supplier is experiencing financial difficulties, it will be important for you to gain the intellectual property rights to and/or ownership of the items necessary for the production or supply of your products. For example, production resources like moulds and templates, drawings and models. It is vital that you are aware that legislation assumes that all of the above belong to the party that has them in its possession. If you want them back, you will need to prove they belong to you!

Questions about your specific situation?

Approach your contact at Joanknecht or speak to one of our advisors.



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