ICSM Business – Landscape maintenance insolvency news: a cocktail of wrongs: factoring, pre-packs and unsecured creditors left unpaid

By Harry Mottram: the collapse of Devon based AC Landscapes and Treeworks UK Ltd this month sums up so many aspects of business that are wrong. Entering into a factoring arrangement in 2021 the firm that operated as an arboriculture, soft landscaping and training organisation the company hit cash flow problems last year and struggled to survive running up debts as its situation worsened.

Devon Live reported: “It had several large contracts and a strong stream of work, with high turnover and profits. In 2021 its turnover was £7.9m with a gross profit of £2.6m.”

Despite the profits it has collapsed into administration and has left a range of creditors, suppliers and contractors with unpaid invoices totalling £577,000. The administrators at Begbies Traynor have arranged a pre-pack sale to an unnamed company worth around £1m which will save 34 jobs as the firm had work in hand. However that will not help those left with unpaid invoices worth thousands.

Ian Carrotte of ICSM said he always had reservations about factoring. He said: “There is no substitute for a disciplined credit policy. Ensuring you are paid within your credit terms of normally 30 days there should be no need to factor. As soon as you do that your business is a hostage to fortune. The factoring firm may reject some invoices you put through on a technical reason such as a disputed amount or lack of a purchase order, they will also take a percentage of the invoice so you are essentially incurring extra costs which affect your turn over.

“Pre-packs have a mixed reputation. Originally created to keep a business afloat and protecting jobs there is a growing body of evidence to show they are regularly abused. Insolvent firms often see them as a chance to dump debt and for the management to retain some control of the company by being bought out by what at times is a related outfit.

“To those suppliers who find they are owed money by a struggling firm we advise to put a customer on stop as soon as they stop paying on time. That way if the worst happens then the loss is minimised. ICSM members are privileged access to credit information and with our free legal letters overdue invoices are usually paid promptly as there is an implication that a rogue payer will be blacklisted and this often enough for them to pay up.”

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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com