How to deal with company debts

Handling company debt and its cash flow is a crucial part of managing your business. If you cannot meet the monthly payments, then annual profit and the value of the business can start to feel meaningless. Poor debt and cash flow management can eventually undermine a viable business, and in the worst case lead to liquidation.

Every month brings credit payments to make, from suppliers to your bank and even investors. A healthy, successful business depends on keeping those under control, so the first thing to protect is the cash flow itself.

Do not panic, and do not bury your head in the sand

If, despite your best efforts, the business begins to run into company debt problems, the two worst responses are to panic or to look away and hope it passes. Neither helps, and the problems do not go away on their own. As with most things, recognising the problem and taking early, decisive action is what stops a bad situation getting worse.

Gather your figures before you decide anything

Start by gathering information and making proactive, informed decisions about how best to reach a resolution. The first place to look is the cash flow: past, present, and your projections for the future. That one task often shows you where the problem is, and where the solution lies.

If, having taken stock of your cash flow, assets and liabilities, you still cannot see a way through, take the advice of an experienced business recovery specialist. That is usually a licensed insolvency practitioner. Together you can go through the company's position, discuss your options, and come up with a plan to address the difficulties.

What are the options for dealing with company debt?

The route that fits depends on whether the underlying business is viable and how much pressure the company is under. The options you may go through include the following.

• Negotiation or restructuring of company debts, agreeing new terms with creditors so the payments become manageable.
• Obtaining finance, where new funding can bridge a genuine but temporary gap.
• A Company Voluntary Arrangement (CVA), which lets you keep trading while the debt is restructured and repaid over a set period, giving the business breathing space.
• Administration, a restructuring option that can limit liability for debts while the business and assets are sold to a new owner, which could even be the previous owners.
• Voluntary liquidation, where the best answer is to liquidate the company and its assets, settle with creditors, and let the directors move on.

There are, then, several ways to deal with company debts, but the earlier you take steps the more chance there is that a viable business can be saved. Do not ignore the signs or creditor pressure. If you are not sure which option fits, our short company options chooser is a good place to start.

Talk it through

If you are feeling the pressure of company debts, call us for a friendly, confidential, no-obligation chat with an experienced practitioner on01625 540 744. We will help you work out where you stand and what to do next.