Protect yourself in tough times

Adam Bernstein
Wednesday, December 21, 2022

The world is in trouble. Interest rates are rising, demand is down, energy is viciously expensive and there’s war in Ukraine.

For Britain, trying to find a new path after leaving Europe, the year has been particularly painful. With recession, which the Bank of England says will last for a couple of years, the only saving grace is that it’s not expected to be too deep. As a press release from mid-October from EY noted, “the risk of a severe downturn has been reduced by the government’s intervention on energy bills; the UK economy is expected to contract around 0.2% each quarter from Q4 this year (2022) through to Q2 2023”.

Figures released by the Insolvency Service for September (2022) show that there were 1,679 registered company insolvencies in September 2022, 16% higher than in the same month in the previous year (1,453 in September 2021) and 11% higher than the number registered three years previously (pre-pandemic; 1,508 in September 2019).

Print firms, like those in other sectors, need to ‘recession proof’ themselves. But how? We asked for the legal lowdown.

Paul Taylor, Fox Williams

Warning signs

Paul Taylor, a partner in the corporate department of Fox Williams, makes a key – and very obvious – observation, that companies do not go from being in rude financial health one minute to insolvency the next. There is, in other words, often a slow period of decline. 

As he says, “‘The cheque is in the post’ famously ranks alongside ‘I’ll still love you in the morning’, as one of the great promises in life. Taking a long time to pay an invoice may in fact be a sign of a well-run company which is prudently managing cashflow. Negotiating longer credit terms to pay suppliers is an approach infamously deployed by certain UK supermarkets.” But he warns that for other companies, without such clout, delays in making payments should set alarm bells ringing.

Other tell-tale signs he recommends looking for include a change in staff because of unpaid wages, failure to file accounts at Companies House maybe because of an unpaid auditor, or a notice that debt has been factored as an attempt to improve cashflow.

Regardless, Taylor says to apply common sense and put in measures to protect your own business.

Credit Control

It’s an elementary principle of business that to avoid unpaid debts in the first place requires the implementation of what Taylor terms “a robust credit control policy”.

In outlining what it should contain, he says that it involves taking out credit insurance which pays out if customers default; setting credit limits for individual customers with discounts for early settlement and interest for late payment; registering at Companies House for its Follow service in order to monitor filings from key suppliers and customers.

He also recommends chasing down unpaid debts and “making sure commercial partners know you will not be fobbed off by repeated promises to pay. Remember, if you are in a hole, don’t keep digging and don’t be afraid to call their bluff by putting them on a stop list”.

Other options are to insist on payment for the remainder of the goods if a customer questions part of an order; and getting to know the payment run dates. “Ring them up the day before and make sure your invoice is included,” he says.

Retention of Title

Next on Taylor’s list of tools to deploy, for those involved in the supply of goods, is Retention of Title (RoT). However, he says that a well drafted RoT clause will be of little use unless it is properly incorporated into commercial dealings. 

This is why he says: “At the very onset of a commercial relationship make sure that your customer signs a copy of your terms. Make sure your terms are then included on your purchase forms/invoices.”

But Taylor says that it’s essential that firms take advice on specific wording of contracts. By way of example, he says that there should be “sub-clauses which oblige the customer to store the goods separately and also to label them as belonging to the supplier. 

There should also be a right to enter the customer’s premises to check that RoT provisions have been complied with and/or to recover goods”.

Importantly, suppliers cannot use force to enter premises. Even so, Taylor says that clauses “should be enforceable on non-payment and without having to wait for a formal insolvency event”. Why? It’s easier to enforce against a company than a battle-hardened insolvency practitioner.

Suppliers should be realistic and it’s important to remember that materials used in a manufacturing process may be impossible to identify or separate out.

Know your rights

Once a firm has hit the buffers, the insolvency process takes over. From a practical perspective, Taylor has seen insolvency officials reject claims that are lodged with them. In response he says to “not be afraid to fight your corner and take legal advice as to the validity of your claim”.

Equally, he says to remember that directors may not always be able to hide behind the corporate veil of a limited liability company; if a director has traded past the point where the company couldn’t have avoided insolvency or made personal promises, he says that they may be personally liable for the company’s debts.

Taylor says that it should be noted at this juncture that “those that have extracted security or the like out of a distressed company, should be aware that an insolvency official has the right to challenge actions taken by an insolvent company during the period of up to two years prior to its demise.”

In practical terms, this means that transactions must not be at an undervalue (too cheap) or unfairly improve the position of one creditor over another – particularly when dealing with a connected party such as a relative or fellow director.

Keep it confidential

It’s very easy in the modern world to spread damaging rumours. So, where a firm has concerns over a supplier or a customer, Taylor’s advice is to not broadcast these concerns. He refers to a 1997 case in which Norwich Union was held to be vicariously liable for alleged defamatory comments made by its employees about Western Provident Association’s financial status. The case was settled out of court by means of an apology and damages – reportedly £450,000 plus costs. Careless talk could, quite simply, prove very expensive.

Spread your risk

Taylor’s last point, beyond putting in place credit control procedures, good contractual terms and understanding the legal position, is to avoid being beholden to one customer (or supplier for that matter). And in relation to risks posed by supplier failure, vertical integration to protect a supply chain might be the answer. As Taylor comments: “A distressed supplier may be receptive to an acquisition approach from a customer.” 

Chris Else, Else Solicitors 

Consider staff first

Chris Else, managing partner at Else Solicitors, sees the issues that relate to print as being the same as those for other sectors.

He picks up on a point noted by Printweek stablemate HR magazine recently, that one way to recession proof a business is to retain good experienced and qualified staff. The employment world, post-Covid, has changed, jobs are plentiful but there are not enough good qualified and available staff. As a result, Else thinks that “hanging onto the right people, working in the right way and in the right positions, is a major factor for success in any business”.

The problem as he sees it is that when staff leave, costs rise because “salaries rise, and the cost of recruitment is prohibitive through the need to pay recruitment agents”. 

In his view, organisations that motivate and inspire employees and consider their work/life balance, as well as offer good promotion prospects, will put themselves in pole position. Part of this, he says, is to “make sure that the business communicates with staff and listens to what their preferences are”.

But equally, firms must protect their position and so Else advises “solid contracts that provide employers as much protection as possible with, for example, binding non-compete clauses and longer notice periods, particularly for staff in management and sales positions”.

Costs and cash

The second key point for Else, based on experience from dealing with distressed clients, is to keep costs under close surveillance. With parts of the printing industry being predicated on low margins and high levels of investment, control is essential.

He worries that firms don’t have their eye on the ball. This is why he recommends “keeping up with the latest demands but balancing them against the time lag by when investments are converted into production and cash”. He also says: “Make sure that assets are used properly, and the cost of funding does not erode proper profitability.”

All too often, says Else, he sees companies that don’t know exactly how they’re performing. So, for him, “good management information and the employment of a chartered management accountant to pin down suppliers with fixed price deals is critical”.

But outside of investment and production, Else expands on what firms already know – that ‘cash is king’. He says that survival is a function of ensuring that customers are spoken to on a regular basis so that invoices are paid within terms and not allowed to slip to 60 days or more: “A good credit control process checks on customer’s ability to pay. This means taking upfront deposits, whenever possible, to cover basic overhead for jobs.” 

In an ideal world, Else would seek 50% upfront, 25% on completion, and 25% within 14 days of delivery.

Contracts and customers

Else turns his attention next to the importance of good terms of sale and that they are properly incorporated into the contract. For him this is important because, as he says: “The best terms in the world are useless unless they form the basis of the contract... they need to detail customer stop payment terms and interest payments due on overdue.” Apart from that, Else says that documentation also needs to outline the debt recovery process if payment is not made according to terms.

Something that bothers Else is that not all firms take the time to get to know their customers. If it were him, he’d ask about what the customer actually needs, who is the firm dealing with, and what is the size and requirements of the customer? As Else says: “Taking time to understand who they are, what they need and how you can help is a start. But delivery on time and in accordance with expectations should be centre stage... don’t over promise or underdeliver on expectations.”

For all of these questions, Else says to lean on sales to gather this information. In fact, he says that it’s the simplest of things that can make all the difference in keeping custom, such as sense checking an order, errors in terms of volume and confirming that the work actually fits the brief.

Else then says to probe more deeply about the nature of the customer, in particular, whether it is a limited company, PLC, or a sole trader, and whether the person placing the order has the authority to do so.

He also suggests trying to enter into preferred supplier agreements to ensure repeat business. That may not be possible. However, Else thinks that there is an alternative: seeking the right of first refusal for business. Regardless of either approach, he says that “good quality control is vital, and it should be embodied in a written contract”.

Warning signs

The modern era has made access to data very easy to obtain. It follows that Else’s next angle of attack is the need to ensure that firms constantly look for the warning signs of customer failure. He says that “credit reference agencies such as Dun and Bradstreet – there are plenty of others on Google – can be useful for this purpose. If you can see in advance that your customer has County Court Judgments against them, or suddenly places a large order and there is a short time scale for delivery without payment in advance then alarm bells should ring”. 

If there’s ever a concern over payment, Else would suggest asking for personal guarantees from directors while also ensuring that terms of business include a valid and enforceable retention of title clause.

He finishes by adding that if there’s worry over the financial status of a customer, the matter should be kept under wraps. As to why, he says that “maintaining confidentiality at all times and assuring customers that you operate clear confidentialities and GDPR processes in the business may be the difference between getting the order and not”.


Amanda Strong, Purpose Media 

People first

Amanda Strong, former owner of Mercia Image and now partnership manager at Purpose Media, says that there is one major issue that printers have to confront to be able to keep going. In a nutshell, she says: “Skilled print production staff have moved out of the industry into more reliable sectors for job security – and I don’t blame them – following being faced with redundancy a number of times in the past.”

Strong knows that there is work out there but says that “finding skilled staff to print and finish is a massive problem”. The solution, according to her, is simple: “If you have reliable good staff, look after them and give them an incentive to stay.”

Pricing right and good relations

But irrespective of the issues relating to employees, Strong highly recommends that printers are not ‘busy fools’. As she outlines, “many printers have fallen into this, and it has been their downfall. Actual costs and time to produce the job should be cross checked against the selling price”. She notes that while “it may be that sales needs to win the order, but if this is at breakeven or with a small margin, it does not allow for any problems”. She says to keep in mind that a machine breakdown or issues with paper handling badly on-press or in the finishing department can prove expensive as costs may have risen since a quote was given.

Another tip from Strong is to maintain good relations with suppliers “to secure supplies”. She adds that “communication when struggling to pay a supplier is key to survival; payment plans are a good option to keep relations as long as you keep to them”.

But in terms of dealing with customers, she advocates either payment upfront or at least 50% with order and balance on delivery – especially when dealing with new clients. Further, she stresses the need for good internal procedures with debtors being monitored. She also warns printers to “not take on a new order unless a client account is up to date; this is a good way to secure payment”.

On the subject of clients, Strong comments that the ideal is to have a diverse and wide customer base and to achieve this, she says to look at the market and see the trends. She says, for example, “it may be wise to move into bespoke packaging where you become known for items that need expertise over and above what a quick turnaround printer can offer.”

With regard to the banks, she comments that a good working relationship is essential. She notes that invoice discounting works well within the industry. As to why, she says that “print is considered a relatively high-risk industry where credit limits from paper suppliers will be low. This may result in paper being paid for up front, so getting 80%-90% of the value of the order on delivery can maintain cashflow to ensure continuity of supplies.”

Ensuring survival

Strong has seen a number of commercial printers go out of business but believes that “firms can survive if they deliver on time and maintain prices”. But to do this she says they “need to be seen, especially to new clients, so maintaining your position on the Google ladder is key alongside a good professional website”. She also thinks that “being seen in your local market as a ‘go-to printer’” can help and says that this can be achieved through working alongside a local marketing company, regular press releases and holding events.

Ultimately, she says that a good reputation cannot be beaten as “once you start letting down your clients, news travels fast”. She continues: “The digital world escalated with the onset of Covid. However, if you have strong practices in place, maintain good relationships, ensure you are charging the correct mark-up, know your client base, and have market expertise then there will always be a need for your firm.”


A legal view

Difficult times

Nicola Langley, head of Legal at the BPIF, comments that lots of member companies have been in business for many years and so will have traded through difficult economic times before.

From her standpoint, she says that “those businesses that survived, and in some cases thrived, during economic downturns were likely to have a varied customer base and good credit control”. She adds: “It looks as though we are headed again into uncertain market conditions and my advice to businesses large and small is to prepare for the worst and hope for the best.”

Actions to take

Some of the actions Langley recommends taking will be well known but are worth saying regardless.

First off, she says that firms should consider adopting a business risk register if they don’t already have one. “Go through the process of assessing risks to the business, give each risk a grading and then plan mitigating action for the most serious risks.” Allied to this, she suggests reviewing on-going customer and supplier contracts and making a note of when they expire or come up for renewal.

Next, Langley says to look at the amount of credit that is being extended to customers, as “even long-term customers can become a credit risk... run a credit check on both new customers and current customers”. And for very small companies, her stance – chiefly where they are owned and operated by one person – would be to “consider asking for a personal guarantee from the owner before extending credit. If they are not happy to give a guarantee, then ask for cash up front”.

Collecting in trade debts is crucial. As Langley explains, “this may seem obvious, but many companies, especially in our sector, seem reluctant to actually ask for the money they are owed. Do not be shy about doing this”.

Other steps that Langley mentions are to diversify as much as possible: “If your customers tend to be in one or two sectors, consider how you can appeal to other sectors.” She then advises reviewing fixed overheads. As she says, “this means looking at your premises, equipment leases, and finance agreements and seeing if there is scope for taking a payment holiday or extending the term of finance deals to help cashflow in the short to medium term”.

Her last option might be considered the nuclear option: making contingency plans to reduce the workforce if necessary. Here though, she strongly recommends taking advice from the BPIF on all the options from redundancy to lay-offs or reduced hours.

A strategic view

Lead change

Marcus Clifford, BPIF regional director, sees the need for firms to clarify their messaging, both internally and externally and to “look at what others are doing and reposition yourself”. Specifically, he says to be sure to attract ideal clients: “We have spoken to many companies over the last two years who have fundamentally changed their mix of customers. Some companies did very well to invest in their client relationships and created great solutions and experiences for existing customers.” 

His advice? Don’t stop.

Continually review

The next step for him is to “work with those who value you, don’t sell yourself short, create your sense of value”. As he says, “the supply chain needs reliable, innovative and great people to work with.” Doing this will allow, says Clifford, firms to monetise their expertise with a clear strategy and profitable business model. But this isn’t a one-time job. Rather, he says it should be reviewed by having “some outside conversations and asking your internal team”. He adds that it wouldn’t hurt to speak to the BPIF as it has “great ideas and this is what we do”.

Of course, firms have been reviewing their financial headroom – they’ve been forced to do it. Even so, Clifford says to keep on with the reviews and discuss all options. But he counsels to “be careful what you say to your bank or main lenders – they might be very risk averse. Speak first to others and gain their objective advice and maybe seek separate support”. For him, getting finance in place before it’s needed is a sensible precaution.

Cashflow counts

Through necessity Clifford’s seen companies take control of cashflow and become better at managing this, especially during Covid. But he sees the need to get to grips with risks created by customers “so, keeping your antennae tuned in is vital. Blue chip businesses can fail, and a bad debt can be catastrophic for you. Keeping a watchful eye on suppliers is important as well as disruption to your own supply chain can be painful”.

Clifford notes that the BPIF works with, a real time health warning database that “helps minimise the risk of financial losses and which identifies opportunities for growth and to win healthy new business”.

Other revenue streams

Covid necessitated the review of ways that firms differentiated their businesses from others along with the development of different revenue streams. For Clifford, one option is collaboration which he considers “a great way to differentiate your offering... sell a service but don’t own the cost”. He says that the BPIF is very active and “can use its extensive network introducing working opportunities”.

Finally, on top of that, Clifford sees value in creating multiple revenue streams “through greater use of technology and equipment that generates many product outputs”. He highlights the fact that “the core competence of our sector is knowledge of data and graphics, and this allows companies to act as a production agency managing these areas and to output any visual media product or service”. Time taken with colleagues for brainstorming would, in Clifford’s view, be time well spent while also looking at what others are doing. 

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