I had a call from a client last week. Unfortunately, he’d had to put his business into administration, and was starting again…so was ringing me to explain the situation. A few of his clients had gone bust on him - but one in particular owed him almost £10,000, and that had left him in an impossible situation. I asked him - what 3 things have you learned from this experience. His answers were:
1. Just because someone is ‘posh’ doesn’t mean they’ll pay you. So don’t just accept people at face value. Get payment up front wherever you can.
2. Don’t spend the VAT money. Put it away into a separate account. (Our bookkeeper used to tell him this, but he didn’t listen).
3. Don’t take too much money out the business. There’ll be nothing left. (Another thing our bookkeeper warned him about).
Sometimes, you might be accustomed to a lifestyle… but in business, if things aren’t going so well, you need to either a) adjust your lifestyle or b) improve the business because, there isn’t a bottomless pit. And the definition of insolvency is: ‘Unable to pay your debts as they fall due.’
Fortunately, for us, he was on our standing order scheme, and our bookkeeper always made sure our bill was a priority… and he’s a decent bloke. But who has gone bust leaving you with bills you now can no longer meet? This is the knock-on effect of the credit crunch.
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