Managing business relationships with creditors or suppliers
Why it’s important to spend time on business relationships with creditors
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 the 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.
How can I manage a business relationship with creditors?
Obviously 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. However, it does generally take time to build up any significant degree of confidence so it’s important to tread carefully. Make sure you fully understand the ins and outs of the initial agreements with any creditors, state your intentions clearly and provide a comprehensive set of terms and conditions which secure your business interests and help to ensure that you don’t leave yourself exposed.
Keeping everyone in the loop
Making sure that all relevant parties are kept in the picture about the state of your finances is better than trying to sweep things under the carpet. If you are late paying a bill or miss an instalment, your supplier or creditor is going to want to know why. Making a part payment in this type of situation can often give you some breathing space and allow you to get your finances in order.
Always aim to reach a compromise rather than allowing matters to end up going to court. Legal proceedings are extremely expensive and time consuming, so it’s far better to agree to some late payment interest or re-scheduling a payment agreement at perhaps a higher rate. Banks are more tricky to deal with as they generally allow less leeway and have set processes so, although maintaining a good relationship with your bank manager is a good idea, ensuring that you meet agreed payment deadlines is crucial.
Debtor protection legislation
The above is subject to the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020. Where they apply to a particular debt, they provide a breathing space by temporarily prohibiting a creditor from taking any step to obtain payment from a debtor.
A variety of documents which may help with managing relationships with creditors can be downloaded from our Business Documents Folder.