Creditor-initiated liquidation, at the coalface - by Darryl Carrick (UK)

We've received the liquidation paperwork today for a former client who owes us a substantial amount of money.  We'd already resigned ourselves to the fact that we were unlikely to see that money again, but having now seen the full extent of the financial position, I was genuinely quite shocked.

Hundreds of thousands of pounds owed, a long list of creditors, and very little in the way of assets likely to be available to pay any of them.  Fortunately, we're in a position where, whilst losing that money was certainly frustrating, we've been able to absorb the loss and carry on.  It wasn't particularly pleasant at the time, but ultimately it hasn't prevented us from doing what we need to do.

What bothers me more, having looked through the creditor list, is how many smaller businesses and individual subcontractors have potentially been caught up in the same situation.  For some of those businesses, a few thousand pounds could be absolutely critical. It could be wages, their own suppliers, a mortgage payment or simply the money they need to keep trading.  Unlike larger businesses, they might not have the cash reserves or other work coming through to soften the blow.

I think that's something that's easily overlooked when we hear about businesses going into liquidation.  We tend to focus on the company that's failed, rather than the people and businesses left carrying the financial consequences.

There's also something quite concerning about how little visibility suppliers can have of another company's financial position.  From the outside, everything can appear perfectly normal. Work continues to be commissioned, orders are placed, and people carry on delivering services in good faith, often with no real indication of the problems that might be developing behind the scenes.

Of course, businesses get into difficulty for all sorts of reasons, and I wouldn't automatically assume any wrongdoing.

I've been in business long enough to appreciate that things don't always go to plan.  That said, I do think there's a point at which continuing to commission work from others, particularly smaller businesses, when you're facing serious financial difficulties becomes a question of responsibility.  After all, those businesses are taking on costs, committing resources and paying people on the understanding that they'll be paid for the work they've undertaken.  We've certainly taken some lessons from the experience ourselves, particularly around credit exposure and knowing when to draw a line.

But more than anything, reading through that paperwork has been a reminder that every unpaid invoice on a creditor list belongs to somebody.  And whilst we can thankfully take the hit, I do wonder how many of the others will find it quite so straightforward.

EDITOR’S NOTE:  Darryl Carrick is a co-director of JSO Fire Safety Consultants based in Sheffield, UK.