How to keep creditors at bay?

[BibiMac]

Hi, any advice gratefully received...

We're a ltd company with a cashflow crisis. We're in the process of taking advice about whether to liquidate / dissolve / carry on. (We're technically solvent as we have stock which is worth more than our current debts).

Whilst we're deciding what to do, what is the best way to keep creditors at bay? We don't want to do anything that would adversely affect / prejudice any future decision about the business.

We owe about £10k across a number of suppliers - not a lot in the grand scheme of things, but enough to be getting hassle. We have contacted them and have said we'll be in touch in the next week regarding payment.

Should we continue to try to delay, or should we be attempting to negotiate a (preferably reduced) payment plan. Would doing the latter cause us problems with a future attempt to liquidate or dissolve?

Thank you!

[benjamin_c]

Comunicate with those you owe money to and explain your circumstances, and keep them informed, don't ignore their calls, emails, letters ect, ensure they know that they will be paid when the cash flow enables this, remember, if your business gets through this you will still need them so try to keep them happy

[kontracta_com]

I'd second that.

I'm obviously going to generalising a bit as each supplier is different, as is probably each member of every credit control department, but if you're upfront then at least everyone is put in the picture (obviously you don't have to overexplain either though)

It won't please everyone and I'm sure you won't get universal thanks or favourable credit for a while but at least you're being straightforward and you know what has been said to who. Speaking for myself, I prefer someone who offers up a payment plan and keeps me up to date with affairs rather than someone who disappears from view or tries to fob me off.

If you don't reach an ideal solution from there, or start to get red letters, then you can always move on to an insolvency practitioner who can give you some specialist advice based on your situation. All the best.

[akirk]

As above...

also be cautious in assuming that stock value is above debts (said with no knowledge of what / quantity of stock) don't make the mistake of assuming that stock is valued at the price you paid in / the price at which you would normally sell out - it might have a fire-sale value of a lot less, meaning that you might not have sufficient to cover debts.

I would start talking to a professional asap - and keep creditors informed. Don't forget that at the point that you are considered insolvent (if that happens) then your duty is to your creditors, not your directors / members / etc.

Alasdair

[Geoff T]

I applaude your thinking along these lines OP - and have to agree with previous posters, a lot of credit control departments (when run by people with the experience) will know a call of the kind you will make will mean two things:

1. You are genuine in wanting to find the best way out of the situation for both you and them - which means a reduced chance of a bad debt...
2. You are more likely to be a loyal customer to the person who gives you the chance to come through the other side (with their help) - they support you now, you support them later by continuing to buy from them...

Have you got a couple of bigger suppliers with whom you've got a good relationship, that have always been more helpful in the past? They'd be my first calls if you feel you can pick up the phone...

Best of luck...

[iridessa]

I helped someone through a similar situation last year and it was decided to be completely upfront and honest with suppliers.

We contacted all the ones which the company had problems paying...explained the cash problem...that it was just temporary and we'd appreciate their help through a bad time. Then negotiated say 3 or 4 payments over a period.

Without exception everyone of them was understanding and accepted this.

If you are not open then you risk one of the larger creditors instigating court action which could be even more expensive for you and ruin the relationship if your business does pull through

[integrity]

The question is do you know whether your company has a future? Is it a temporary "blip" or is it more chronic? Is there a longer term solution (increase sales volume, increase price, achieve more efficiency, etc)

Temporary cash flow issues can happen. Most creditors would prefer you to be up front and honest and offer what you can commit to pay. Something is better than nothing. Reduced payment is normally better than delaying with no payment.

As was mentioned earlier stock values can be misleading. If you decide to ask an Insolvency Practitioner to liquidate your company there will be fees.

The creditors could end up with little and you would have lost your livelihood.

Difficult choices. If you want to talk it through privately on PM.

[wizzard]

Baseball Bat? :D