Supplier and Trade Creditor Pressure
If suppliers have started chasing overdue invoices, stopping deliveries or putting the company on cash terms, take it as an early warning rather than just an inconvenience.
Supplier pressure can escalate quickly from phone calls and emails to solicitors, court action, sheriff officers and even winding-up proceedings.
The important question is not simply “Which supplier should I pay first?”
It is: can the company realistically get all of its debts back under control?
What can a supplier do if my company does not pay?
A supplier may have several options, depending on the contract and the debt.
- Stop supplying further goods or services
- Remove credit terms and insist on payment in advance
- Pass the debt to a solicitor or collection agency
- Raise court proceedings
- Use sheriff officers and diligence after obtaining the necessary enforcement authority
- Serve a statutory demand
- Present a winding-up petition where the statutory requirements are satisfied
- Exercise contractual rights relating to goods supplied in an appropriate case
Different suppliers may take different approaches. One may accept instalments while another moves immediately to formal recovery.
What if an important supplier stops supplying us?
This can be more damaging than the debt claim itself.
If a supplier provides something essential to trading, losing that supply may mean the company can no longer fulfil orders or generate revenue.
Before agreeing an emergency payment, ask:
- Is this supplier genuinely critical?
- Can another supplier replace them?
- How much is needed to restart supply?
- Can the company afford future purchases on the new terms?
- Will paying this supplier leave wages, HMRC or other essential costs unpaid?
A payment may be commercially sensible where it protects a viable business. It is much harder to justify where it simply allows an insolvent company to continue for another few days.
Can I negotiate more time with suppliers?
Often, yes.
Suppliers may prefer a sensible payment arrangement to the cost and uncertainty of formal recovery.
A useful proposal normally explains:
- How much is owed
- What can be paid immediately
- What can genuinely be paid each week or month
- When future supplies will be paid
- Why the problem occurred
- Why the company expects the position to improve
Avoid making promises simply to stop today’s phone call.
If the company agrees £5,000 per month but can really afford only £2,000, the arrangement is likely to fail and credibility will be lost.
What if several suppliers are chasing at once?
That is usually more significant than one disputed or temporarily overdue invoice.
Create a simple list showing:
- Each creditor
- Amount owed
- How overdue it is
- Whether supply has stopped
- Whether legal action has started
- Whether any debt is personally guaranteed
- Which suppliers are genuinely essential
That quickly shows whether the company has a manageable creditor problem or a broader cash-flow insolvency.
Can a supplier send sheriff officers?
Potentially, once the supplier has obtained the necessary Scottish enforcement authority.
Formal diligence can then affect company money and assets.
By that stage the problem has moved well beyond ordinary credit control.
Can a supplier freeze the company’s bank account?
Potentially, through Scottish arrestment once the creditor has the necessary rights to enforce.
If an arrestment catches company funds, money intended for wages and day-to-day trading may become unavailable.
Can a supplier serve a statutory demand?
Yes.
A creditor can serve a qualifying statutory demand on a company for an unpaid debt.
If a debt exceeding £750 remains unresolved after the 21-day statutory period, that can provide a basis for later winding-up proceedings.
If a supplier has moved from ordinary chasing to a statutory demand, treat that as a significant escalation.
Can a supplier wind the company up?
Potentially.
A trade creditor can petition for compulsory liquidation where it has the necessary standing and can demonstrate that the company is unable to pay its debts.
A winding-up petition should not be treated as an aggressive debt collection letter. It is a court application seeking liquidation of the company.
What if the supplier says the goods still belong to them?
Some supplier contracts contain a retention of title clause.
In simple terms, this may mean ownership of particular goods does not pass to the company until they have been paid for.
Whether a clause is effective depends on its wording and the facts.
If a supplier makes a retention-of-title claim:
- Do not simply dispose of the goods
- Identify whether the goods can still be found
- Keep the supplier’s terms and conditions
- Keep invoices and delivery records
- Tell the insolvency adviser if liquidation is being considered
A retention-of-title claim is very different from a supplier simply saying, “Those goods are ours because you haven’t paid us.” The contractual position needs to be checked.
What if I personally guaranteed the supplier account?
That changes your personal position.
If you gave an enforceable personal guarantee, the supplier may have a separate right to pursue you if the company does not pay.
This can create a natural temptation to pay that supplier before everybody else.
If the company is insolvent, take advice before making substantial payments simply because a particular debt exposes you personally.
Which creditors should I pay first?
There is no sensible universal answer.
A viable company may need to pay certain suppliers to keep trading. But once the company is insolvent, directors need to consider creditors as a whole and be careful about payments made for improper reasons.
Before making a large selective payment, ask:
- Why is this creditor being paid?
- Does paying them protect the company’s business?
- Is the payment being made because a director has a personal guarantee?
- Will the company still be able to meet wages and current taxes?
- Is liquidation already likely?
When does supplier pressure become an insolvency warning?
Look for the pattern rather than one overdue invoice.
- Several suppliers are overdue
- Credit limits are being withdrawn
- New orders require payment upfront
- Important suppliers have stopped deliveries
- HMRC is also unpaid
- The company is using today’s receipts to pay old debts
- Directors are regularly putting personal money into the business
- The total arrears continue increasing
If that is happening, the business may no longer have a simple supplier problem. It may be unable to pay its debts as they fall due.
Can the company still be rescued?
Potentially.
If the underlying business is profitable, creditor pressure may be capable of being dealt with through:
- Improved collections from customers
- Short-term funding
- Asset sales
- Negotiated creditor arrangements
- HMRC Time to Pay
- A wider restructuring
- A Company Voluntary Arrangement in an appropriate case
The solution must leave the company able to meet its future debts as well as clear the historic ones.
When should liquidation be considered?
A CVL may need to be considered where there is no realistic way to return the company to a sustainable position.
Typical warning signs include:
- Supplier arrears are increasing every month
- Key suppliers will no longer trade with the company
- HMRC arrears are also serious
- The company cannot fund payroll
- Formal creditor action has started
- There is no realistic new finance
- The business is trading at an ongoing loss
What should I do today?
- List every overdue supplier.
- Mark which suppliers are essential to trading.
- Identify any court, solicitor or sheriff officer action.
- Record any personal guarantees.
- Prepare a realistic short-term cash position.
- Do not promise payments the company cannot afford.
- Get advice if the overall arrears are increasing rather than reducing.
Supplier Pressure FAQs
Can suppliers stop supplying us?
Often they can, depending on the contract and their terms of trade. They may also insist on cash upfront for future orders.
Can I ask suppliers for instalments?
Yes. A supplier may agree, but the proposal should be realistic and affordable.
Can a supplier send sheriff officers?
Potentially, once the supplier has obtained the necessary Scottish enforcement authority.
Can a supplier present a winding-up petition?
Potentially, where the company cannot pay its debts and the statutory requirements are satisfied.
Do unpaid goods still belong to the supplier?
Not automatically. A valid retention-of-title clause may give a supplier rights over identifiable goods, but the actual contract and circumstances need to be checked.
Should I pay the supplier I personally guaranteed?
Do not make that decision solely because of your personal exposure. If the company is insolvent, obtain advice before making substantial selective payments.
Are suppliers losing patience?
Tell us which creditors are chasing, what the company owes and whether any formal action has started.
We can help you distinguish a temporary cash-flow squeeze from a company that now needs restructuring or liquidation.