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Winery barrelled over by high value debtor

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It’s always pleasing when a client places a big order but once the goods are delivered and the sale becomes a debt, that big order can turn into a big problem.

Such was the case for a winery that contacted us to pursue a client debt of more than $170,000. We reacted pretty quickly and managed to collect a little over $30,000 but, after some time the debtor wound up the business, making all remaining debts uncollectible.

This put a massive dent in the winery’s cash flow for some time and put the business at serious risk. That risk could have been reduced though, or perhaps even avoided altogether.

Measures the winery could have taken to reduce their risk included: making proper credit checks (as opposed to ‘credit reference checks’) on the business prior to allowing credit; setting a credit limit that was more in keeping with the size of the business; ensuring a Director’s guarantee was in place to secure the debt; registering the debt on the Personal Property Securities Register (it only costs $6.80!), and; having protocols in place so that they responded earlier when the debt became overdue.

Each one of these steps offers a different layer of protection but none of these had been put in place. You may or may not have debtors of $170,000 or more but any debt is worth protecting. After all, it’s your money in someone else’s account.

We have recently set up a specialist BCA Debt division that helps clients set up these systems and reduce the risk or impact of debtor failure. To see whether your business is at risk from such issues, we invite you to make use of our new free Credit Risk Assessment tool. It only takes two minutes and gives you a clear indication of your level of risk and steps you can take to reduce this. Pretty good investment of two minutes of your time don’t you think?

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In a recent survey my clients
identified having a system for

Accounts Management

to be one of the top area's
they struggled with.