Recent measures won’t help those on the wrong end of a bad debt

Whatever else the outcome of a spell of admin, you can bet that somebody’s bottom dollar isn’t going to the unsecured creditors. In its mildest form, the progression from a late payment to a bad debt is the fiscal equivalent of a traffic accident. You rarely see it coming so you’re rarely able to avoid it happening. The damage may eventually be fixed, but the memory lingers on.

At its worst, however, it can force you off the road permanently. As the current economic predicament we’re in is demonstrating all too clearly, bad debts are bound to lead to other bad debts. OK, so the proverbial happens; even so, anyone in a trading relationship expects to be paid, otherwise what’s the point? This isn’t detached observation. I’ve been waiting on the Italian contractor for an EU-funded project based in the Lebanon to cough up for over 18 months (try pursuing that), and have the overdraft to prove it.

Some businesses deserve to fail, are accidents waiting to happen, and if you get in the way then, well, you should have paid more attention to the traffic. But an awful lot more don’t, and are just unfortunate enough to have been in the wrong place at the wrong time.

I’m not an economist, so the received wisdom that the way to deal with debt is to incur more of the same is beyond my ken. Surely, though, rather than having pumped all those trillions into the banks – the institutions most likely to drive temporarily cash-strapped but otherwise viable, well-managed businesses towards a dead end – might not there have been a better way? For example, to siphon some of it off in the direction of innocent bystanders to the crash in order to keep their engines ticking over rather than arbitrarily run them off the road.

Likewise, I’m not a legislator, but it seems to me that something has to be done to fast-track payments. If 30 days on receipt of invoice became the mandatory limit, then wouldn’t the cash flow more freely; wouldn’t we negotiate the route between outlay and income more securely? To be grid-locked at the wrong end of the supply chain cul-de-sac is bad enough; being starved of fuel in the process is adding insult to injury.

Maybe this is just naive; you tell me. Just for once, though, wouldn’t it be great if those who are pontificating about the dreadful snarl-up we’ve gotten ourselves into would really mean it when they say: lessons have been learnt, and we’re taking steps to ensure that this never happens again.

Des King is a freelance journalist specialising in packaging. He can be contacted by email at packagingnews.editorial@haymarket.com

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