Printing industry braces itself for the end of furlough scheme as companies come out of hibernation to a bleak autumn
When Zanders Paper went into liquidation last month and Clarendon Press in Gloucestershire and Datum Colour Print in Hatfield also called it a day it became clear that the industry has taken a hit from the Covid-19 crisis.
Inflation is set to rise to 3% this summer while business failures increase as costs rise and orders fall. It’s a pretty depressing scenario as when the furlough system ends zombie firms will collapse.
Printing and allied industries have always had a tough time when it comes to being paid – even in the best of times – but clearly the economic downturn triggered by the Covid-19 crisis has made things worse. Add to that much of the industry’s clients are in the hospitality, travel and retail sectors – and of course there has been a steady decline in the publishing of magazines and newspapers – it all adds up to a cut in clients.
Ian Carrotte has seen it all before having been witness to the recessions of the 1980s, 1990s and the Credit Crunch of 2008 when many print firms were left high and dry.
He said: “Late payment has always been an issue for printers as many adopt the outdated ‘my word is my bond’ approach and consider a simple handshake as a contract. Clients will use all manner of excuses to spin out payment if that is the case but surprisingly during the pandemic things have not got worse. I think the reason is partly because many of the least efficient at credit control had gone to the wall before Covid-19 arrived. Yes quite a few printing firms have collapsed in the last year which we list every month in our newsletter – but perhaps not as many as we might expect compared to many industries. But when those firms who have been hibernating wtih the furlough scheme and grants come off the drip feeds this autumn they will face a bleak time and many will go bust.
“Accounts departments have by and large improved credit control and that is another factor – and we constantly tell ICSM members not to trade with firms with famous names who flagrantly break credit terms. Take Carillion – they boasted on their website that they were as safe as houses and suppliers would be paid on 120 days. Well, we know what happened there.
“Printers should stick to their credit terms – if it is 30 days – then put a customer on stop if they fail to pay up. Dialogue is good. If a client rings and say they have a cash flow issue but offer to pay a chunk of what is owed with a timetable of when the balance is to be paid that is good. It’s when they don’t answer the phone or your emails that there’s a problem.
“I know Covid has presented problems, but people buy people – so always visit your customers whenever possible including their accounts department and keep things friendly and always diplomatic.
“ICSM has always been an advocate of legislation that forces firms to pay on time and allows their suppliers to charge interest on late payments. Governments come under pressure from big business to resist new laws governing credit but for a typical SME or sole trader they are only an few invoices away from a cash flow crisis and potential insolvency.”
The Government explains your rights in charging interest. They state: “The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ – this is 8% plus the Bank of England base rate for business to business transactions. You cannot claim statutory interest if there’s a different rate of interest in a contract.”
Ian Carrotte feels that more can be done in tightening credit terms – especially for small businesses, sole traders and the self-employed.
“We offer members a free micro debt recovery service,” he said, “ICSM members complete a form online and it goes to the debtor – usually for less than £1,000 – and it can be several years since the invoice was issued – but unpaid. That works really well about 80% of the time.
“For large amounts we have our inhouse debt collection service and in an average year that will secure payment of hundreds of thousands of pounds to members left out of pocket. A large debt can send a company under so speed is important and since ICSM is a third party in the effort to secure payment the debtor will often pay up at the first contact. They are basically using your cash as a free loan.
“This is a true story: it was a printing company in Devon who is still a member of ICSM. They were on an industrial trading estate and had a mix of smaller runs for shops and small businesses and much large print runs for big companies. Cashflow was a nightmare as most of their customers paid late. A shop came up for rent around the corner on the high street of the town – and so they took it on as it was cheaper than the larger unit and put in their presses and associated kit into the shop and opened for business. Customers would pay up front with an order and some would pay on collection or delivery. It was simply a change of mindset with their clients. Cashflow was solved.”
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.email@example.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.firstname.lastname@example.org
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk