There is a particular kind of dread that comes with an unpaid invoice you cannot settle. The phone rings, you recognise the number and you let it go to voicemail. A reminder email arrives and you leave it unopened. For many owners, avoiding creditors feels like buying time. In reality it usually does the opposite, eroding goodwill just when you need it most.
Creditors are not always the adversaries they seem. Most would far rather be paid slowly than not at all, and many will agree reasonable arrangements if approached early and honestly. For those who want to read how one adviser presents his work in this area, the public site of Ben Whitehouse is a place to start. This article focuses on the practical side: how to prepare, what to say and how to keep arrangements on track once they are agreed.
Understand Who You Owe and Why It Matters
Before speaking to anyone, build a complete list of creditors. Include suppliers, landlords, lenders, asset finance providers, tax authorities and any individuals who have lent money to the business. For each, note the amount owed, how overdue it is, whether the debt is secured, and how important the relationship is to continued trading.
This exercise helps you prioritise. A supplier who provides a critical component with no alternative source needs different handling from a one-off contractor. Secured lenders may have rights over business assets. Tax authorities often have specific processes for time-to-pay arrangements. Knowing these differences lets you approach each conversation with the right expectations.
Prepare Before You Pick Up the Phone
A creditor conversation goes best when you can show that you understand your position and have a realistic plan. That means having an up-to-date cash flow forecast that shows what you can afford to pay and when. It means being able to explain briefly why the business is under pressure, whether that is a lost customer, a rise in costs or a delayed contract.
Decide in advance what you will propose. Offering a specific, affordable arrangement, such as a monthly payment over six months, is far more persuasive than asking the creditor what they would accept. Make sure the proposal is one you can genuinely keep. Breaking a second promise does more damage than the first missed payment.
If you are working with an adviser, involve them in this preparation. Whether you are speaking to Ben Whitehouse or another adviser, a second pair of eyes on your figures and proposal is valuable, and rehearsing the conversation beforehand can make the real call far less daunting.
Principles for Productive Conversations
The tone of a creditor conversation often matters as much as the content. These principles help keep discussions constructive:
- Make contact before a payment is missed, or as soon as possible afterwards.
- Be honest about the situation without oversharing or dramatising it.
- Offer a specific proposal backed by your cash flow forecast.
- Listen to the creditor’s concerns and constraints, which may be real.
- Confirm any agreement in writing promptly, including amounts and dates.
- Treat similar creditors fairly and avoid favouring connected parties.
- Keep in touch with progress updates, especially if circumstances change.
The point about fairness deserves emphasis. When a company is in financial difficulty, directors in many jurisdictions have legal duties to consider creditors’ interests as a whole. Paying one creditor in full while others receive nothing, particularly where the favoured creditor is connected to the directors, can create serious problems later. Take advice if you are unsure.
Dealing With Different Types of Creditor
Trade suppliers often value the ongoing relationship and may accept extended terms in exchange for continued orders, though some will move you onto cash-on-delivery until the arrears are cleared. Be prepared for that and factor it into your forecast.
Landlords may agree rent deferrals or temporary reductions, especially where the alternative is an empty property. Approach them with evidence of your trading position and a clear timeline for returning to normal payments.
Banks and lenders generally expect formal communication. They may ask for management accounts, forecasts and a written plan. Keeping your relationship manager informed early tends to produce better outcomes than surprising them with a breach.
Tax authorities in many countries offer structured arrangements for businesses that cannot pay in full on time. These usually require you to stay current with new liabilities while paying off arrears, so make sure your forecast allows for both.
Keeping Arrangements on Track
Agreeing a payment plan is only the beginning. Diarise every payment date and treat these commitments as seriously as payroll. If you foresee difficulty meeting an instalment, contact the creditor before the date, not after. A proactive call to explain a short delay is received very differently from silence followed by a bounced payment.
Review your overall position regularly. If several arrangements are becoming difficult to sustain at once, that is a sign that the underlying problem may be larger than a temporary cash squeeze. At that point a broader conversation with an adviser about restructuring options may be needed.
Turning Difficult Calls Into Rebuilt Trust
Handled well, creditor conversations can strengthen relationships rather than damage them. Suppliers remember the customers who were straight with them during hard times, and lenders value borrowers who communicate openly. The discomfort of making the first call is real, but it is almost always smaller than the discomfort of the alternative. Start with the creditor you most fear speaking to; once that call is done, the rest usually feel far more manageable.