Managing business relationships with creditors or suppliers
Maintaining any type of business relationship is extremely important, whether you’re selling a low value item to a consumer, trying to nurture a long-term contract with a regular client or if you’re working with a supplier or creditor to build up your business. You can be in a rather vulnerable position when it comes to creditors as they may have access to your valuable assets as part of any security they hold. The last thing you want is entire debts being called in or court hearings to deal with; allowing things to spiral out of control can destroy your business, particularly if it’s in a fledgling state.
It’s vital to get off on a good footing as you don’t want to start a business relationship where there is a lack of trust or confidence but it generally takes time to build a significant degree of confidence and trust. Make sure you fully understand the ins and outs of the initial agreements with any creditors, state your intentions clearly and use suitable terms and conditions to secure your business interests and minimise your legal exposure.
Keep all relevant parties in the picture about your financial state. Don't sweep things under the carpet. If you are late paying a bill or miss an instalment, your supplier or creditor will to want to know why. A part payment when late in paying may give you some breathing space so that you can try to get your finances in order.
Aim to reach a compromise rather than ending up with a debt claim going to court: court proceedings are extremely expensive and time consuming. Agreeing late payment interest or re-scheduling a payment agreement at perhaps a higher rate will be better. Even if you have a good relationship with your bank, it might be more of a problem than another creditor - banks generally allow less leeway and have set processes, so ensure that you meet agreed payment deadlines.
See below under "Preventing legal action being taken by creditors" as to the debt respite scheme which can provide a breathing space to debtors.
A variety of documents which may help with managing relationships with creditors can be downloaded from our Business Documents Folder.