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Reading client distress early - and protecting your own WIP exposure
Accountants sit closer to a business’s finances than almost any other adviser. The management accounts, the VAT returns, the payroll runs and the year-end conversations give you an earlier, clearer view of financial distress than the directors themselves often have. That position carries opportunity and risk in equal measure - and it usually forces a decision long before anyone else has to make one.
The warning signs are almost always there
Distress rarely arrives without notice. The pattern tends to build quietly: lengthening creditor days, a PAYE or VAT balance that keeps growing, requests to file late or defer payment, pressure to hold back your own invoices, margins slipping, director’s loan accounts climbing, or a client who has simply gone quiet. Taken one at a time, each is manageable. Taken together, and left unaddressed, they are how a fundamentally viable business becomes an insolvent one.
Your work in progress is part of the exposure
When a client is struggling, your firm’s unbilled time and aged fee notes are exposed just like any other creditor’s. If that client ultimately fails, your outstanding fees rank as an unsecured claim - typically near the back of the queue, recovering little or nothing. The longer you keep working in the hope of eventually being paid, the larger that exposure grows. Continuing to invest time in a client who cannot pay is not loyalty; it is an unsecured loan you never agreed to make.
To help, ignore or withdraw?
Every accountant reaches a decision point with a struggling client, and there are three directions. One is to help: to act early, bring specialist advice into the room, and give the business a genuine chance to stabilise - often preserving both the client relationship and your fees. The next is to ignore: to keep working unpaid until the position is beyond rescue, or the final option is to withdraw: to down tools and cease acting until you are paid- a step that can tip an already fragile business over the edge. Neither blind continuation nor abrupt withdrawal is a strategy. Knowing which situation you are actually in is vital.
This is where an early referral changes the outcome
With over 30 years’ experience, we are well versed in working alongside accountants to assess quickly whether a client is genuinely viable and, if so, what realistic options exist - from HMRC Time to Pay arrangements and informal restructuring through to a formal process, if that is the right outcome. A referral does not mean losing the client. In most cases it protects the relationship, resolves the fee position, and keeps you firmly on the right side of your own professional and financial risk. Where recovery is not realistic, an early and orderly process protects everyone involved, including you.
Early action gives you and your client the most options. If a client’s arrears are building, if their behaviour has changed, or if your own WIP is climbing with no clear route to payment, a short conversation now is worth far more than a difficult one later.
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Leonard Curtis is a trading style of Reach Commercial Finance Limited, registered at Riverside House, Irwell Street, Manchester, M3 5EN. Company Register number is 09056450. Reach Commercial Finance Limited is authorised and regulated by the Financial Conduct Authority, FRN: 753686. Reach Commercial Finance Limited is an authorised credit broker and not a lender. We work with an unrestricted number of lenders to find a potentially suitable arrangement for your consideration. ICO registration ZA069234 and you can check via www.ico.org.uk. We will receive commission from lenders. Different lenders pay different amounts depending on different commission models. For transparency we work with the following commission models: fixed fee, fixed rate of commission, percentage of the amount you borrow and rate for risk (this is based on the risk profile of the business). Further details of the commission model, calculation and amount will be disclosed to you throughout your customer journey. Privacy notice.
Leonard Curtis Legal Limited is a limited company, registered in England and Wales with registered number 09820186. Registered office: Riverside House, Irwell Street, Manchester M3 5EN. Leonard Curtis Legal Limited is registered with the Solicitors Regulation Authority with number 626004.