The agricultural sector, often built on trusted relationships, is increasingly struggling with the significant impact of late payments.
For many farmers and contractors, the time lag between supply and payment is no longer sustainable, forcing businesses into financial strain. The issue is particularly challenging because often the poorer payers are fellow farmers or customers who dictate unfavourable payment terms. While payments may eventually arrive, the delay, sometimes months after delivery, can cause a concerning cash flow deficit.
The hidden cost of delayed payments
With the cost of borrowing still relatively high, a farmer’s reliance on overdrafts or loans to bridge the gap while waiting for debts to be settled is having a noticeable impact on the bottom line and, more importantly, on their ability to reinvest and grow the business. In the current financial climate, relying on goodwill is not an option. A robust and systematic approach to credit control and legal protection is essential for long-term farm viability.
1. Get your paperwork in order
While securing money upfront is ideal, it’s often impractical in the agricultural supply chain. Instead, ensure your business paperwork protects you as much as possible. Review your Terms and Conditions (T&Cs) thoroughly. They must clearly reference payment terms to simplify debt recovery. In some cases, your T&Cs may allow you to withhold further products if payment hasn’t been made—but seek legal advice before taking this step.
2. Strategies for chasing debt
When a payment deadline passes, shift into active debt recovery mode:
- Prioritise credit control: Make debt management a core business function. Send reminders promptly via phone, email, or letter.
- In writing: Begin with a final demand letter detailing the outstanding sums and referencing breached payment terms.
- Follow up on oral agreements: If the debtor admits the debt verbally, follow up immediately in writing.
3. The pragmatic approach
Before pursuing litigation, ask: is the debt worth the time and cost? Can the debtor pay? Often, a pragmatic approach is best such as agreeing to a payment plan or settling for a lower amount.
- Payment plans: Request a standing order or a clear payment timetable to reduce missed instalments.
- Settlement: If settling for less, seek legal advice and record the agreement in writing. Mark any offers “without prejudice” to protect them from being used in court.
For more information about this article and our agricultural legal services generally, please contact us online or call 0345 209 1000
Posted:
