Debtors Management – What could go wrong?

Client X has been transacting with Debtor XYZ for 5 years without ever having problems of receiving payment from them.  They made religious payments exactly on due date, not paying one day late.  However for the first time in five years Debtor XYZ started experiencing cashflow issues and requested extended terms from Client X.  Due to the debtor having an impeccable payment history with client X they did not hesitate to grant the extended terms to them for an amount of R500 000.  When due date came the client wasn’t able to pay and went into liquidation.  Resulting in client X being out of pocket with R500 000.  Fortunately for client X their debtors book was insured.  They notified the insurer immediately and their claim was paid 30 days later after submission.  They were insured for 90% of the outstanding balance and could therefore continue with their operations as before.   Client X had no stress of attending liquidator meetings as the insurer took care of that for them hence their normal day to day operations continued without any interruptions of having to buy out time to attend these meetings.  Should Client X not have been insured they could have faced serious cashflow issues which could have lead to more serious implications for their business.