A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Cash-Flow Problems: What to Do
Cash-flow problems are the most common reason businesses fail. They can arise suddenly - a lost contract, a bad debt, or an unexpected cost - or build gradually through a structural issue. The good news is that cash-flow problems are often fixable if you act early.
Step 1: Understand the Problem
Before you can fix a cash-flow problem, you need to understand it. Ask:
- Is the problem temporary (a one-off) or structural (ongoing)?
- Is the business viable - can it be profitable if the cash flow is fixed?
- How much do you owe, to whom, and when is it due?
- How much cash is coming in, and from where?
Step 2: Take Immediate Action
- Chase outstanding invoices - money owed to you is your fastest source of cash
- Negotiate payment terms with suppliers - most will prefer a longer payment to no payment
- Cut non-essential costs immediately
- Prioritise debts - tax and wages have particular importance and consequences
- Talk to your bank - they may offer temporary facilities or extend an overdraft
Step 3: Negotiate with Creditors
Most creditors would rather be paid slowly than not at all. Approaching them early - before they chase you - gives you far more options. HMRC may agree a Time to Pay arrangement; trade suppliers may accept a payment plan.
Step 4: Consider Formal Options
If the problem is structural and the business is viable, consider:
- A Company Voluntary Arrangement (CVA) - restructure debts into affordable monthly payments while trading continues
- Administration - if creditor pressure is acute, a moratorium buys time
- Refinancing - restructuring debt or raising new funding
If the business is not viable, early advice on a CVL protects your position as a director.
Step 5: Take Professional Advice
Cash-flow problems rarely fix themselves, and acting late limits your options. A licensed insolvency practitioner can help you diagnose the problem, negotiate with creditors, and choose the right route - whether rescue or closure.
Speak to a Licensed IP
Our Manchester-based practitioners will assess your cash-flow position honestly and tell you whether the business can be rescued or whether closure is the responsible route. Free and confidential.