Liquidity problems in the holiday months - how do you arm yourself?

Many bankruptcies in summer months

Traditionally, we see a spike in insolvencies in the month of June. The cause of this is as simple as it is painful: after the holiday pay has been paid out and the payroll tax has been remitted on it, the invoices still to be paid cannot be paid. Many companies simply lack the cash to do so. There is justifiable fear the number of bankruptcies will be even higher this year. The corona crisis has struck at the heart of many sectors in recent months. It remains to be seen whether all affected companies will overcome this sting. Even if they take advantage of government support measures, it could still be the end of the story for many of them.

Companies that survive the 'holiday money rush' should certainly not rejoice too soon. Because often the problems are not over by then. After all, after the payment of holiday money comes the spending thereof: the holidays themselves. A period during which turnover decreases for a certain time or even (due to summer closure or the construction holiday) disappears altogether. But the fixed costs continue during this period. Even in the months of September and October, this often creates liquidity pressure, even for companies that have factored this in.

6 tips: this is how to arm yourself against buyers with payment problems

So, given the situation outlined, it is not inconceivable that sometime in the next few months your buyers will be unable to pay you. Fortunately, you can guard against it. How you can do so, you will read below. We have 6 concrete tips listed for you that you can use to your advantage.

1. Our first advice is to make clear agreements and confirm them in writing. Perhaps a clue, but there are plenty of examples of companies that did not have their agreements properly written down (and therefore did not have a leg to stand on).
2. Keep in mind - if you have credit insurance - the deadline for initiating collection proceedings. If you do not expect your debtor to pay within the set deadlines, it is wise to apply for a postponement of collection with your credit insurer in advance. If you fail to do so, your credit insurer may reject a potential claim. So take no chances!
3. If the overdue period is not exceeded, you can accept it without consulting your credit insurer. Please note that the originally agreed maturity date then remains applicable.
4. If the overdue period does exceed, then you should submit this request to your credit insurer. The credit insurer will then see if it will allow you to pass on insured.
5. If you have customers in Germany, be extra alert to their payment behaviour. Should they go bankrupt, you run the risk of risk that the German administrator will reclaim the amounts paid to you as supplier. This can even go back up to four (!) years. Detailed information on this so-called insolvenzanfechtung you can read in our previously published article 'Help! German administrator claims back paid turnover'.
6. Should you receive a request to defer payment beyond the arrears period, please contact us. We check your buyer's creditworthiness and check whether multiple payment arrangements are in place. In consultation with your credit insurer, a deferred payment may be accepted, keeping your claim insured.

We are happy to advise you

We hope these tips will help you guard against the expected liquidity problems in the summer months. Would you like to know more about what you can do if your buyer is temporarily unable to pay, or have you received a specific request to defer payment beyond the arrears period? Our specialists will be happy to advise you.