When running a small business, it is essential to maintain a good relationship with your creditors, to make sure your business operations run smoothly. If you are going through a difficult period where you are struggling for cash flow and are at risk of failing to pay bills on time to your creditors, it’s time to act. Establishing a positive relationship with creditors will increase their trust and confidence in you, giving you more time to resolve problems and pay off money owed. Failing to do so could have serious consequences for the future of your business. Allow us to explain how you can manage your creditors effectively.

What are creditors?

A creditor is also known as a lender, someone who is owed money by you. Your most common creditors will usually be suppliers (known as trade creditors), the bank, or statutory bodies such as HMRC. Creditors such as banks can repossess other valuable assets such as homes or cars on secured loans and can even take debtors to court over unsecured debts. This can further affect the cash flow of your business, so it is essential to manage your creditors carefully.

Identify key creditors

Financial backers

When managing your creditors successfully, you must first identify which ones are most essential to the day to day running of your business. Your main source of finances tends to be your most important creditors, for example if you have outstanding bank loans then the bank will be one of your most important creditors. You should look to build trust with them by providing detailed management accounts so that they can clearly view your financial position.


Your key creditors are most likely suppliers who supply you with a service or product that is not easy to replace with an alternative. For example, an IT supplier who maintains your business IT system. Switching suppliers for such an important aspect of your business is a risk which could affect overall operations.

Inflexible creditors

You can automatically incur charges from bodies such as HMRC for late payments, so you should rank them as one of your most important creditors. In some circumstances you can arrange repayment instalments, the team at Bells would be happy to discuss your options with you. You should also prioritise your local authority, as you can be sued for non-payment of business rates. Other inflexible creditors include utilities suppliers and other large organisations who will be difficult to resolve disputes with.

Agree payment terms with your creditors

Organising the terms of payment with your creditors is essential to building a relationship of trust with them. Your suppliers are the most important creditors to resolve these payment terms with, as you will want to make sure that they are reliable, supply a high-quality product and offer fair credit terms. If you have a good selection of suppliers available, it is worthwhile to shop around and see what options are available. If your supplier is concerned about losing you, they may offer to improve credit terms so that you have a longer credit period.

Build a close relationship with your creditors

It is important to maintain a close relationship with creditors such as suppliers and enter into a clear written agreement to avoid confusion. It is worthwhile to keep open lines of communication with them, so that they can trust your operation more and get to know the ins and outs of your operation. Once they understand your business, they can even offer their own ideas of how to adapt your product or services to operate more effectively.

Organising and managing your creditors is an essential part of your business operating effectively, and our team at Bells Accountants are here to help with this. We offer our support and advice to start ups and small businesses in organising their finances to ensure they do not incur unexpected charges from creditors. We’ve helped multiple new businesses navigate these early stages and begin to thrive. To discuss our services with us, get in contact today by calling 020 8468 1087 or emailing  and a member of our team would be happy to help.