A creditor compromise uses a balance that keeps changing

The negotiation and the trading account move together

A hypothetical supplier and customer discuss a reduction of old arrears while new orders continue. Each updated statement shows a different balance, and both sides refer to settling the account without identifying the same amount. Before discussing a percentage, establish which obligations the proposal addresses and how later transactions are intended to be handled. Otherwise, the apparent agreement may concern different figures.

Prepare a dated reconciliation

List the invoices, payments and credits included in the proposed balance as at a clearly identified date. Keep new transactions visible in a separate part of the reconciliation rather than deleting them. Ask the accountant to verify the figures where necessary. The schedule should make the proposal understandable without assuming that its legal scope follows automatically from a spreadsheet heading.

Review the wider financial pressure

ASIC advises directors to remain aware of the company's financial position and seek qualified assistance when insolvency is a concern. Continued trading and a compromise of older debts should be assessed together. Do not assume reducing an old balance makes fresh commitments affordable. Give advisers both the proposed settlement and the current trading obligations so the review reflects the actual position.

Source: ASIC: Insolvency for directors

Explain the distinction in the proposed terms

In the hypothetical example, the parties may intend to address specified old invoices while leaving later purchases payable under separate terms. A lawyer should review whether the wording achieves the intended result. Do not rely on a phrase such as full account settlement without understanding its effect. Security, guarantees and disputed amounts may also require specific treatment.

Control changes during the discussion

If a payment or credit arrives before agreement, update the reconciliation and explain the change to the authorised participants. Keep earlier versions so the movement can be traced. Avoid applying the proposed discount to a new invoice simply because the total account balance changed. Any revised proposal needs to be clearly identified and considered through the agreed approval process.

Reconcile the outcome after agreement

Record the actual accepted terms and ask the accountant how to reflect them appropriately. Check that staff managing new orders understand which obligations remain. CRP can help assemble the cash and account information for that discussion. A defined balance gives the negotiation a stable subject while keeping ongoing trading from silently changing what each side believes has been settled.