I was recently consulted by a director of a company which was experiencing cash flow problems, principally due to a downturn in sales, as it was a seasonable business. The director was keen to explore our debt management services and free cash flow advice.
Avoid insolvency with a debt management plan
The business was viable, but as a result of an unexpected short term downturn in orders, it had accumulated trade supplier debts of £50k which it could not pay on time. The company was coming under increasing creditor pressure and the director sought my advice as to how he could utilise debt management services and avoid an insolvency procedure. I suggested a Creditor Cashplan, which is designed to pay creditors over a 10 month period in order to allow the company the breathing space it needs and to enable directors the time to concentrate on running their businesses and securing new work.
The director provided me with a list of creditors that he proposed to include within the Creditor Cashplan as part of the debt management services, which did not include the company’s main supplier, as it was essential to the company’s business that this supplier was excluded from the arrangement. I received information from the director, which demonstrated that the company would be able to make the required payments to Cashsolv in order that I could in turn pay the suppliers.
The debt management process
I wrote to the suppliers to explain that the company was experiencing cash flow problems and that Cashsolv would be responsible for making 10 equal monthly payments to them in order to discharge their outstanding debt. I further explained that all future orders would be paid within the company’s normal trading terms.
As Cashsolv is experienced in implementing successful debt management services, I was able to reassure the suppliers that their debts would be repaid, but the company just needed time to do so. All of the suppliers accepted the proposal as they recognised that they would receive 100% of their debt over 10 months and the alternative may have been that the company would have to cease trading and enter into Creditors’ Voluntary Liquidation which would have resulted in them only receiving a small proportion of their debt.
With debt management services you can go back to managing your business
The company made all of its payments to Cashsolv on time which allowed me to pay the suppliers on the same day each month. After several payments were made, the creditors were reassured that their debt would be repaid. On the tenth month the final payment was made and all the suppliers were repaid in full and within the specified time period.
The director was extremely grateful for the debt management services of Cashsolv as it afforded him the time to concentrate on securing new business without having to concern himself with dealing with creditor pressure. I also received a communication from one of the suppliers thanking me for ensuring that their debt was repaid as they had recognised that this would not have been the case if the company had ceased to trade.