Several affordable repayments can become one unaffordable week

Each conversation sounds manageable

Imagine a business offers three creditors $2,000 a week each while discussing old debts. Each conversation considers only that creditor's balance. The owner sees healthy sales and assumes all three offers will fit. Before making commitments, combine the proposed repayments with current operating costs and existing arrangements. The relevant question is whether the whole schedule can be supported.

Keep the company position central

ASIC's director guidance recommends qualified advice when the company may be unable to pay debts when due. Separate agreements do not remove that concern. Take the combined picture to the accountant and an appropriate insolvency adviser before promising payments. Do not assume that a creditor's acceptance makes the business financially able to perform the arrangement.

Source: ASIC: Insolvency for directors

Collect every current proposal

List the recipient, amount, frequency, proposed start date and any conditions. Distinguish accepted arrangements from offers still being discussed. Include existing tax, finance and supplier commitments rather than showing only the new negotiations. Record who made each proposal so a sales manager's promise and an owner's later offer are not accidentally treated as separate obligations without review.

Place payments on their actual dates

Use the proposed dates in the cash forecast. In the hypothetical example, three weekly repayments consume $6,000 each week before current trading costs. A monthly average can hide the first difficult Friday. Test the bank position around the payment dates and identify receipts that are late, disputed or still only expected. Ask the accountant to review the assumptions.

Resolve collisions before making promises

If payments clash with wages or other commitments, show the shortfall honestly to the advisers. Discuss what lawful and realistic options exist rather than quietly delaying one creditor to satisfy another. Do not alter an existing agreement unilaterally. Any proposed change should be considered in light of the company's wider circumstances and documented appropriately if accepted.

Maintain one approved schedule

Give one person responsibility for recording arrangements and flagging proposed changes before they are offered. Keep evidence of creditor responses and compare actual payments with the plan. CRP can help organise the commercial discussion. The purpose is to prevent several apparently small commitments from becoming a repayment programme that nobody assessed as a whole.