Finance

Financial Problems are big Problems!

Ten step guide to dealing with financial problems

Running your own business can be stressful at the best of times. But what happens when your business takes a turn for the worse. Mounting debts, agitated creditors and even the threat of court proceedings can leave you feeling out of control and isolated.

If you take action you can help yourself - if you don't you will never be in control of the situation, and put yourself at risk of being completely at the mercy of your creditors. Our ten tips will help you take the first steps to taking control.

[1] The first and most important step to take is to acknowledge that you have a problem that you are unlikely to solve on your own. Seeking advice from your accountant will help clarify your options and ensure that you stay on the right side of the law. Remember insolvency law can be complicated and varies considerably depending on the nature of your debts and the legal structure of your business.

[2] Talk to your creditors, or their advisors. You need to get your creditors on your side, and not talking to them won't help do that. Keep them informed as to how you are doing, and if a payment to them is going to be late - tell them. Think about it from their side - if you were owed money and the person who owed you had gone to ground what would you think?

[3] If you can't pay a big bill - consider offering instalments. Most companies would prefer to receive a realistic sum weekly or monthly rather than nothing, or indeed having to resort to court action.

[4] If you do offer them instalments make sure you can afford to keep them up though. It is better to ensure you keep repayments at a level you are sure you can keep to rather than having to return to your creditors monthly to beg their forgiveness. You are also more likely to rebuild their belief in you as a debtor, raising the chance of them extending further credit to you one day in the future.

[5] Don't threaten your creditors with the idea that you might go bankrupt, or become insolvent. This is overused as a threat, and does nothing to build a relationship. It will also heighten their concerns over the likelihood of your business surviving - probably not what you want to do at this moment.

[6] Give preference to those creditors who would cost you most in the long run. Secured creditors, who might have your house on the line, or essential suppliers such as electricity, gas (or for a business possibly the telephone) should preoccupy you more.

[7] Don't be threatened yourself. Debt is commonplace, and for many reasons creditors may sometimes overextend themselves. Most of these problems can be worked through, given time and goodwill. Bankruptcy or insolvency is processes that protect both creditor and debtor, so don't be bullied into paying Peter at the expense of Paul. The harder you are pushed by a creditor the more likely it is that they are aware that they are in a weaker position than other creditors, who might for example have your house to fall back on.

[8] Detail everything in writing, and get written agreements to any offers you make. Keep records of any phone call, dates, times and details, so if you need you can prove that you did renegotiate agreements.

[9] If you are still sinking seek further help from your accountant. You are not alone out there. We can almost certainly guarantee that your problems have been dwarfed by someone else in the past.

[10] Finally if you get court or official papers react quickly.