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Under pressure from suppliers – what are the options for my business?

Licensed UK Insolvency Practitioners FREE Meeting for Company Directors

We can help with serious company debts, HMRC and creditor pressure, VAT/PAYE/Tax arrears, cash flow problems and raising finance.

Reviewed: 11th October 2019

Suppliers are hugely important to the operations of many businesses. The relationships you foster with your suppliers can be the difference between running a smooth and well-organized business, or else one which struggles to fulfil its orders. Continuity of supply is vital if you are to run an efficient and effective business; however, continuity of supply often hinges on your ability to pay your suppliers as and when payments become due.

During times of financial pressure, it may be tempting to withhold payment to certain creditors in order to maintain a hold on your company’s own cash flow. However, failing to pay what you owe could see these important relationships falter leading to cracks appearing within your supply chain. Once relationships with your suppliers become strained, your ability to service client orders could quickly become affected jeopardising your company’s future.

While many suppliers, particularly those you have a long-standing relationship with, will extend a level of patience and be keen to help you navigate any short-term financial challenges you are experiencing, you must also remember that suppliers will have their own financial commitments to adhere to and won’t be able to wait forever for you to pay up.

There are a multitude of reasons why you may be experiencing trouble paying your suppliers; some may be one-off factors or those out of your control such as waiting on a large payment from one of your customers, whereas in other cases it could be a symptom of deeper financial concerns. The reason is likely to affect the strategy your supplier takes when looking to recover the money you owe. 

Creditors can take a variety of actions against your company should your account remain in arrears. They are likely to cut off supply of further goods until your account is brought up to date, or alternatively moving forward they may demand payment is made up front or a substantial deposit given before they will continue supplying your company.

In some instances your suppliers may threaten to escalate the dispute and begin legal proceedings against your company. Should this happen you need to contact a licensed insolvency practitioner as a matter of urgency if you want to save your business. Once you have defaulted on a debt over £750 for at least 21 days, the creditor can begin winding up action against your company which could see it being forced into compulsory liquidation.

The very worst thing you can do is to ignore the situation. Your supplier will already know there is something wrong when you fall behind on your payments; refusing to engage with them will only serve to dampen any leniency or goodwill which may have been extended to you, or even lead to your supplier putting a block on your account which could see your company’s operations grinding to a halt.

Instead, entering into an honest dialogue with your supplier and explaining the situation and how you intend to resolve the problems you are facing is always the recommended course of action. You may be able to secure a payment extension until your cash flow situation improves, or else an agreement to pay back what you owe through a series of instalments. By having a frank discussion you may also be able to limit the damage to your supply chain and allow you to continue to trade as normal.

If your company is experiencing cash flow difficulties Real Business Rescue can help. You can arrange a completely free no-obligation consultation with one of our licensed insolvency practitioners where you can learn more about the options open to you and your business. Call our expert team today on 0800 644 6080 to book a meeting at your local office.

Keith Tully

Partner

0800 644 6080
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