The instinct when you cannot pay somebody is to avoid them until you can. It is understandable and it is the most expensive thing you can do.

Creditors are not primarily annoyed about being paid late. They are annoyed about not knowing. A supplier told nothing assumes the worst and acts accordingly; a supplier given a date usually waits.

Call before the date, not after

A call the day before a payment is due is a completely different conversation from a call two weeks after it was missed. In the first you are a business managing a temporary problem. In the second you are somebody who has already broken their word once.

The window matters more than the message. Do it early even if the news is bad and the plan is incomplete.

What to say

Four things, briefly:

  • What is happening, in one sentence, without a long story. "A large customer has paid late and it has moved our cash out by about six weeks."
  • What you can do now. A partial payment, however small, changes the character of the conversation entirely. It demonstrates the intention rather than describing it.
  • A specific date for the rest. Not "as soon as possible". A date.
  • What you will do if that date moves — namely, tell them before it does.

Then confirm it in writing. Not because you expect a dispute, but because the person you spoke to has to justify the arrangement to somebody else, and an email makes that easy.

Never promise a date you are not confident of

A missed promise costs you far more than the original late payment. You get one or two of those before the relationship changes permanently and the account goes to legal.

If you are unsure, promise the date you are confident about rather than the one you are hoping for. Paying early against a conservative promise builds credit; paying late against an optimistic one destroys it.

Who to prioritise

Not simply whoever shouts loudest. Think about which relationships the business cannot operate without: the supplier who is the only source of something you need, the landlord, the people who would stop delivering. Those get paid, or get the most careful management.

Be careful with anything you have signed personal surety for. If the company cannot pay, that debt follows you home, and it should be weighted accordingly in any decision about who gets what.

When they have already escalated

If a letter of demand has arrived, engage with it rather than ignoring it. Most creditors would rather have a payment arrangement than a judgment they still have to enforce, and the arrangement is usually still available at this stage.

What you should not do is ignore court papers. A default judgment obtained because nobody responded is difficult and expensive to undo, and it attaches to the business — and sometimes to you — for years.

The relationship afterwards

Businesses that communicate through a bad period frequently keep the supplier. Businesses that go quiet almost never do.

When it is resolved, say so. A short note confirming the account is up to date, and a thank you for the patience, is worth more commercially than it costs to send.

General guidance, not legal advice. Where there are judgments, sureties or the possibility of insolvency, take proper advice.