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Are your contra accounts safe with your trading partners?

Jun 02, 2019
The principle of contra account entries between origin and destination agencies is well established in the international moving industry. In many cases it works well to reduce costs and administration.

Contra AccountsWhilst accounts are roughly in balance, everyone is happy.  In fact, even if there is an imbalance it can still work fine provided the accounts are reconciled regularly before they get out of hand. That’s all very well, but what happens when one side of the relationship stops trading?

It’s a sad fact of life but, sometimes, moving companies go out of business. It’s always been that way but, with costs escalating and prices under unprecedented pressure, it’s happening a lot nowadays.  When there has been a habit of contra accounting between two companies for a long time, both parties can feel comfortable that while you owe us as much as we owe you, we are fine.  Oh no you are not!

If a company calls in the receivers, they will be interested only in what money is owed to them. The receivers will gather in money from their debtors first, then assess the remaining wealth of the company, pay first call creditors then distribute what’s left proportionately.

So, the warning, in these perilous times, is to make sure that you are confident about the financial standing of your partners, especially if you contra account. If you have any doubts you would be well advised to put your financial arrangements on a more traditional footing quickly, before you find yourself unexpectedly out of pocket. 

 

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