Can you keep trading during a restructure?

Trading while old debts grow

A joinery owner is preparing a restructure while the workshop has orders to finish. Staff want to know whether to come in tomorrow, and a supplier wants approval for another delivery. The owner assumes that a rescue proposal means business as usual. The immediate question is more practical: who can authorise the order, how will it be paid, and does finishing that job improve the position or create another unpaid bill?

Identify the process you are actually using

The word restructure can describe an informal negotiation or a formal insolvency process. Those situations do not give the owner the same powers. Confirm the process, the appointment date and the person responsible for explaining trading limits.

ASIC explains that eligible companies in small business restructuring retain control while developing a plan with a practitioner. That does not remove the need to follow the process rules. Ask specifically which transactions need consent and how that consent should be recorded.

Source: ASIC — Small business restructuring and the restructuring plan

Separate old debt from new operating costs

Build a purchase and payment list from the start of the process. Identify wages, materials, rent and other costs required to carry out new work. Do not mix these with historical invoices when deciding whether the next order is affordable.

A supplier accepting an arrangement for old debt is not necessarily agreeing to fund new deliveries. Confirm new supply terms directly. Make sure the person ordering knows the approved limit and the payment source before work is committed.

Choose work the business can finish

Look at each active job’s remaining costs, expected collections and practical completion requirements. A large contract can make the sales pipeline look healthy while requiring more cash than the business has.

Prioritise the information needed to make a decision: materials still to buy, labour still to pay, customer approvals and the next valid billing point. Where a job cannot be funded, discuss the options with the practitioner before making promises to the customer or transferring the problem to another supplier.

Use a short trading review

Set a regular review with someone responsible for reconciling actual receipts and payments. Compare them with the forecast used in the proposal. Record missed receipts, new disputes and spending outside the agreed plan.

Escalate a shortfall when it appears rather than waiting for the next formal milestone. Continuing trade should be supported by current information. If the assumptions stop working, the response may need to change even though the original intention was to save the business.

Test the trading plan

List tomorrow’s proposed orders and the cash needed to complete them.

Confirm approval rules and payment arrangements with the appointed practitioner.

Assign someone to report actual cash against forecast and flag any job that cannot be funded.

Call CRP today about restructuring support and coordination of the right professional assessment.