Negotiate with Creditors
Looking to negotiate with creditors is not an easy task because invariably this is undertaken as a last resort and/or when the business is suffering an element of stress. Also creditors may not be sympathetic, particularly if large debts have accumulated and they have instigated recovery proceedings before any action is taken by you.
If this process is to be undertaken it is advisable to negotiate at the earliest opportunity with a focus of endeavouring to maintain goodwill and if required extend payment terms. Something as simple as answering phone calls from your creditors, explaining you are aware of their situation and are taking steps to resolve can have a positive outcome. The creditors aim is to recover the majority if not all that is owed and the option to extend terms or accept a partial payment may prove more attractive than an insolvency procedure culminating in little or no return.
How to negotiate with creditors at a glance
Set a budget
Establish the precise on-going cash flow position of the business to determine the capacity to make payments and the amount available. At all times directors must ensure that continued trading does not worsen the creditor’s position as this could lead to a possible wrongful trading action in any subsequent liquidation.
Answer the phone
On-going dialogue helps maintain goodwill with your creditors. Creditors are more likely to instigate recovery proceedings if they are unable to get a response.
Review and renegotiate terms and conditions
Long term relationships are an important aspect of any business. Look to review and negotiate on any such contracts to more favourable terms such as reduced interest or longer payment terms.
Get everything in writing
Any revised terms and conditions or payment arrangements must be agreed in writing and properly documented to protect both parties.