Managing Creditors in the Quiet Season

You’re riding high, cash flow is great and all your bills are getting paid and then… the quiet season approaches….

Prepare in Advance
If you know (by reviewing your P&L from previous years) that you will be headed towards a slump in sales later in the year, do some prep work while your cash flow is strong. Have a chat to your bank manager about an overdraft or loan; you will find that your bank will be more open to discussion while your business in on a high. By doing your research and looking at financing options from other banks at this time, you will also be able to negotiate the best terms. Should you wait until you really need the assistance, you won’t have any bargaining power and will end up repaying whatever they offer.

Prioritise
Consider what you need to continue to run your business and prioritise the associated bills in order of what would cause the most grief should it go unpaid for an extended amount of time; don’t just pay your bills in the order of when they would usually fall due and don’t pay a bill simply because the creditor is being a “squeaky wheel”.
At the top of the list will be payroll (yourself included) and ATO, rent, and as I’m sure you like having the lights on and the phone ringing, your utilities. If you have payment agreements already in place such as loan repayments stick to them.
Make a plan based on your cash flow forecast as to when you will be able to fix up your bills and…

Communicate
Ensure you have a strong relationship with your creditors; this can be built on something as simple as paying your bills consistently on time. If your suppliers know you are “good for it” they are more likely to work with you when times are tough. Communicate prior to the bill being due to let the creditor know you won’t be able to make payment on time. Give a brief, honest reason for the late payment, but don’t go overboard with your sob story- the person on the other end of the phone is much more interested in the when than the why. Have a date in mind prior to making the call as to when you will be able to make payment then add a few days, if you simply don’t know when payment will be made, give them a time as to when you will next be in communication to arrange a payment date- and stick to it. Put any pay agreement in writing for your benefit and theirs.

For assistance with your cash flow forecasting, contact Tradies Accountant today.