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Ten Creditors' Warning Signs
- Your
company cannot get new credit or extend existing credit.
- You
do not pay to creditor's terms.
- You
have had red warning letters.
-
Creditors regularly phone you chasing payment.
-
You spread credit around by opening accounts with new
suppliers.
- You
have had a Court summons or judgment.
- You
have arranged deals with creditors to pay them over time.
- You
have broken promises to creditors.
- You
have had visits from Sheriffs or bailiffs.
- You
have had a statutory demand or a winding up petition.
In
our experience the cashflow pressure that distressed businesses
suffer starts quite early on. The directors get used to
dealing with minor issues, however they often grow into
much bigger issues quite quickly. Failure to collect debtor
payments on time can lead to missed payments to creditors.
This leads to loss of trust and the breakdown of communication.
Trading
Out see our
sister website here for more details.
Talk
to your suppliers and creditors - it is common sense to
involve them otherwise they will feel that you are wilfully
avoiding them.
Doing
deals with creditors over time can be a successful way to
deal with cashflow problems. However, as a director or an
advisor you should be asking the bigger picture questions
such as:
-
Is the business viable?
- Can
we make profits over the next period?
- Are
we missing the fact that our cost base is much too high
for our income levels?
- Should
we be taking advice from turnaround advisers?
Doing
deals with creditors?
In
all such circumstances we recommend building a cashflow
projection that is realistic and apply common sense to it
- what happens if a promised customer payment does not come
in on time? Will you be able to meet promised creditors'
payments? So always ensure that the payments that are required
or promised are based on cashflow and profitability.
Do not forget things like PAYE, VAT and bank loans, direct
debits etc. These are easily forecastable as are salary
payments, rent etc. Make sure that all payments promised
are achieved otherwise the creditor may take legal action.
If
your cashflow projection shows a deficiency (in other words
you need more income / investment / bank facility than is
available) then take advice from KSA now.
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