Dealing with creditors during COVID-19

My creditors and suppliers are chasing me for payment after lockdown but I need more time to pay

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

So is there anything you can 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 understand your figures and how they might affect negotiations.

Cash flow forecasting and budgeting

If you prepare detailed cash flow forecasts and budgets it demonstrates to creditors and suppliers that you’re serious about paying and want to come to an arrangement whereby they recover their debt, just over a longer period of time.

For that purpose, forecasting cash flow 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’s advisable to be completely open about your financial position, however, backing up the information you provide verbally with cash flow forecasts, budgets, and any other relevant documentation.

Having the information at hand can ease negotiations and shows you’ve considered the creditor/supplier position. It’s also helpful to know who you need to approach, and to prearrange a phone call by emailing first.

More time to pay your tax bills

HMRC runs a scheme that allows eligible businesses more time to pay when tax arrears have built up. The coronavirus crisis created such economic devastation that the tax body broadened access to their Time to Pay 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.

Time to Pay arrangements typically last between three and six months, but in some cases a longer time period may be agreed. It’s helpful to seek professional guidance when applying for a TTP - these negotiations are in-depth and licensed insolvency practitioners are typically specialists in this area.

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 IP, who also distributes the payment to creditors on a monthly basis.

To find out more about Company Voluntary Arrangements and other potential measures when you’re being chased for payment, get in touch with one of our expert team to arrange a free same-day consultation. Real Business Rescue are insolvency specialists and can negotiate with creditors and suppliers on your behalf.