Do you have to tell your suppliers you're insolvent?

Silence can buy time, but it can also buy debt

Keeping quiet can feel safer when you are already behind, but silence can also tempt you to place more orders on credit that the company may not be able to pay. ASIC says a company is insolvent when it cannot pay debts as they fall due, and unpaid suppliers or requests for cash on delivery are warning signs. ([asic.gov.au](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors?utm_source=openai))

The real danger is not embarrassment. The Corporations Act includes a duty to prevent insolvent trading, and ASIC warns that directors may be liable for debts incurred while the company is insolvent. If you keep buying stock after the warning signs are obvious, you may be turning a short cash squeeze into a personal exposure. ([legislation.gov.au](https://www.legislation.gov.au/C2004A00818/2025-03-17/2025-03-17/text/original/pdf/2?utm_source=openai))

Stop the next credit order before it lands

The first move is blunt: stop ordering on credit you cannot realistically pay for. Separate must-have materials from nice-to-have extras, check what is already committed, and work from the cash you actually have today, not the invoice you hope will arrive next week. ASIC says to seek early advice as soon as you suspect the company cannot meet debts when due. ([asic.gov.au](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors?utm_source=openai))

That pause does not mean every supplier is cut off. It means you stop creating fresh debt while you work out which suppliers keep jobs moving, which ones can wait, and whether any order can be reduced, delayed or switched to a different payment structure. The point is to avoid making the problem larger before you understand it. ([business.vic.gov.au](https://business.vic.gov.au/business-information/finance/manage-suppliers/manage-payments-to-suppliers?utm_source=openai))

Source: Official guidance

Tell the suppliers who keep the job moving

Tell the suppliers who matter most first, especially the ones whose stock or hire equipment you need next week. Business Victoria says to contact the supplier, discuss the problem, take notes, and agree a timeframe for repayment or another arrangement. Silence gives them the worst possible story before you have offered a better one. ([business.vic.gov.au](https://business.vic.gov.au/business-information/finance/manage-suppliers/manage-payments-to-suppliers?utm_source=openai))

You do not need a long speech. You do need enough honesty to stop them extending credit on a false picture. If a supplier is already moving you to cash on delivery, tightening terms or refusing new credit, ASIC treats that as a common sign of financial trouble, not a minor admin issue. ([asic.gov.au](https://asic.gov.au/for-business/small-business/starting-a-small-business-company/small-business-company-directors/company-director-liabilities-when-things-go-wrong/?utm_source=openai))

Set the new terms on paper, not in memory

Agree the new terms in writing on the same day. The written note should say what is owed, what can be supplied, the revised payment date or instalment, and what happens if the plan slips. Business Victoria recommends documented terms and written confirmation so there is no confusion about what was actually agreed. ([business.vic.gov.au](https://business.vic.gov.au/business-information/finance/manage-suppliers/manage-payments-to-suppliers?utm_source=openai))

This is also where you protect the paper trail. Keep invoices, purchase orders, emails, delivery dockets and notes from every call. If a later review asks why new credit was still being used, those records help show when you realised the pressure was serious and what action you took to reduce it. ([asic.gov.au](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors?utm_source=openai))

Get advice before the next order goes out

If you cannot pay the current debt and still need supply, you need advice before the next order goes out. That may mean a restructure discussion, a formal insolvency process, or a better creditor plan, but you cannot make that call safely from guesswork. ASIC says early professional advice improves the chance of survival. ([asic.gov.au](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors?utm_source=openai))

Today’s practical next step is simple: stop new credit purchases, speak to your key suppliers, write down any revised terms, and gather your invoices, bank balance and recent correspondence. Then call CRP about insolvency services so independent qualified professionals can help you assess the options. This is general information only, not legal advice. ([business.vic.gov.au](https://business.vic.gov.au/business-information/finance/manage-suppliers/manage-payments-to-suppliers?utm_source=openai))