As businesses and communities around the world are dealing with the knock-on effects of Covid-19, many businesses, schools, leisure facilities, and events have already been forced to close their doors in a bid to contain the spread of this worrying virus.
And although these are necessary steps to protect the health of us all, especially the most vulnerable, the measures are already having devastating effects, with businesses of all shapes and sizes as they are already struggling to stay afloat.
However, there are number of different steps that you can take to manage creditors if your income falls as a result of Covid-19.
But first and foremost, what is a creditor?
A creditor can be anyone – a supplier, bank or even an individual – that has provided a service or goods to a business, even if an agreement has been made that the loaned goods, funds, or services will be paid back at a later date.
It’s absolutely vital that all businesses keep a close eye on their creditors throughout the financial year but especially during concerning times such as the Covid-19 pandemic.
Knowing how much you owe out each month and when the payments need to be made will allow you to stay on top of cash flow, and manage wages and overhead payments. It’s vital these payments are made on time to ensure you maintain a good relationship you’re your creditors.
How to manage your creditors if your income falls due to Covid-19
Although the true extent of the financial implications to business remain unknown at this stage, there is definitely a risk of income dropping. So it’s important to be aware of the ways you can manage your creditors if your income falls as a direct result of Covid-19.
Be honest with your financial backers
Your financial backers should be your top priority when it comes to managing your creditors. So, if you think that you’re about to get into financial difficulty due to the pandemic, the best thing you can do is be open and honest with your bank, provide regular management accounts, and make sure that you’re aware when payments need to be made. At the same time, you should also inquire what will happen if you are unable to make any payments on time.
Determine how essential your suppliers are
If cash flow becomes an issue and you’re struggling to manage your creditors, it’s worthwhile evaluating your suppliers, considering how much you’re paying out per month and whether your business can operate if you were to halt their services.
Identify creditors that are likely to be inflexible
Finally, it’s important that businesses are able to pinpoint creditors that are likely to be inflexible. For example, statutory bodies such as HMRC can surcharge you for late payment automatically and local authorities are also in a position to sue any business that does not pay its business rates. Other creditors may be more flexible.
Remember, building a good relationship with your creditors is key to managing cash flow during these uncertain and challenging times.