Covid-19: Advice for worried directors

My creditors and suppliers are chasing my company for payment as we come out of lockdown but I need more time to pay

Many businesses will continue to struggle with cashflow after lockdown – a situation exacerbated when creditors and suppliers are chasing for payment. For company directors it can be difficult to deal with this stressful situation when you’re trying to move your business forward but you are constantly ‘firefighting’ creditor issues.

So what can you do to gain more time to pay your bills and ease the pressure?  Negotiating with creditors for more time to pay is clearly a good first step but before you make contact you need to fully understand your financial position and how this might affect negotiations.

Cash flow forecasting and budgeting

Preparing detailed cash flow forecasts and budgets will demonstrate to creditors and suppliers that you’re serious about paying and want to come to an arrangement where they recover their debt albeit over a longer period of time.  For that purpose forecasting cashflow for several weeks ahead is a good idea but if your cash situation is dire you may want to forecast on a daily basis to give you maximum control over your working capital.

Informal negotiations with creditors for extra time to pay

With such an extensive and dramatic effect on business in general, your creditors and suppliers may be more open to negotiations and work with you to agree a new temporary arrangement whilst you regain your financial stability.  It is advisable to be completely open about your financial position backing up the information you provide verbally with cashflow forecasts, budgets and any other relevant documentation.  Having the information at hand can ease negotiations and shows you’ve considered the creditor/supplier position.

We can act as intermediaries either advising you in the background or dealing directly with creditors spelling out the situation in both legal and commercial terms.

More time to pay your tax bills

HMRC runs a scheme that allows businesses more time to pay VAT, PAYE and Corporation tax arrears.  Coronavirus has caused HMRC to expand their Time to Pay ('TTP') scheme in an effort to support businesses in sudden and unexpected financial distress.  Again careful preparation and presentation of supporting figures and information is crucial to success - HMRC will need to know your business’ financial position in detail and how you’re going to meet your TTP obligation over its full term.

Formal insolvency measures to pay creditors and suppliers

If negotiations fail and creditors continue to chase you for payment after lockdown there are several formal insolvency measures that can provide more time to repay. One of these is a Company Voluntary Arrangement (CVA) which allows your business to make one monthly repayment towards all the debts incorporated in the agreement. Negotiations are conducted by a licensed insolvency practitioner who also distributes the payment to creditors on a monthly basis.

To find out more about your options get in touch with one of our expert team to arrange a free initial consultation meeting, call us on 0800 331 7417