HomeFWJ TakeawayCompany rescueBusiness recovery and rescueHow to deal with suppliers and customers during a period of business rescue

When a company is facing financial difficulties continued supply will often be key to a successful turnaround and business plan. However, how to continue to pay suppliers when cashflow is tight?

Directors need to be very careful – personal liability can follow

Directors in particular need to be very mindful of their duties to creditors when a company is in financial difficulties. They may face personal liability if the company goes into formal insolvency proceedings and they are found to have incurred increased credit when they shouldn’t have.

There is a very fine line to be walked in keeping a business going and continuing to trade and pay suppliers without risking further damage to creditors, and personal liability on the part of directors.


Maintaining good customer relations is key to any business rescue and company turnaround situation. Obviously, losing customers can lead to the ultimate failure of the company. It is important not just to maintain key customers, but to acquire new customers in order to push forward a successful business turnaround.

  • If customers become aware that a business is in trouble, they may have concerns about their own on going supply chain and whether goods that have the benefit of warranties or aftersales support may no longer have that support in the future.
  • It is therefore vital for companies to maintain a dialogue with customers and to be honest about what is happening with their company, reassuring customers of a business turnaround plan and strategy at the earliest point. It is of comfort for customers to know that a business rescue expert may be on board, to show that the company is not burying its head in the sand and is doing all it can to bring around an effective turnaround.
  • When a business is struggling, customers might decide to stretch out payment which can have drastic affects on cashflow. The benefit of a good debt recovery strategy for the company shouldn’t be underestimated.


It is equally important to maintain an open dialogue with suppliers so that they are fully aware of the company’s situation and can have confidence as far as possible that they will be paid for a continuing supply chain. Creditors will want to protect their position as far as possible, and may start to insist on tighter payment terms, or ask for security.

Another method of protection that creditors may use is to retain the title in their goods until payment has been made in full. A creditor will be entitled to claim for all amounts due in a formal insolvency process, but they will be fully aware that quite often if a company has reached the stage of a formal insolvency then they will not have enough money to repay all creditors in full.

Be prepared to maintain an open dialogue with suppliers and customers during the business turnaround. Many suppliers and customers will be sympathetic as long as they are fully aware of their position and can make informed decisions on going forward.

As with all business recovery and turnaround problems, the sooner you speak to an expert and deal with the matter, the more options you have and the less likely it is that your company will have to enter formal insolvency proceedings. Speak to our friendly team of business rescue experts today to go through the options for you and your company.

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