At Dunkley’s, we work with businesses of all sizes, and one thing is always true: borrowing itself isn’t the problem, losing visibility is. Loans help fund growth, smooth seasonal dips and provide much-needed working capital. Debt only becomes stressful when costs rise, cashflow tightens or deadlines are missed.
With the right processes, you can stay firmly in control, and this guide outlines the practical steps we help clients put in place. Use it as a checklist, review it monthly and adapt it to your business.
Start With a Clear View of Your Position
The most effective tool for managing debt is a 12-week rolling cashflow forecast, updated weekly. Map expected inflows and outflows, then stress-test the numbers. For example, assume receipts arrive 30 days late or sales drop 10%. If a crunch appears, you can act before it hits.
To make this work, build a weekly routine:
- Review aged receivables and payables: Tackle the biggest and oldest items first.
- Check loan covenants and headroom: Identify potential breach dates under downside scenarios.
- Maintain an obligation calendar: Include PAYE, VAT, corporation tax, rent, utilities, direct debits, insurance and loan repayments. Set reminders at least 10 working days before deadlines.
Assign ownership for chasing debtors, negotiating with creditors and approving payments. A short weekly catch-up keeps everyone aligned and prevents surprises.
Know Today’s Costs, Rates and Rules
Debt decisions depend on up-to-date numbers. Key rates and thresholds for 2025/26 include:
- Bank Rate: 4.0% (autumn 2025)
- HMRC late-payment interest: Bank Rate + 4%
- Statutory interest on overdue B2B invoices: 8% above Bank Rate
- VAT registration threshold: £90,000
- Business rates multipliers (England): 49.9p (small business) / 55.5p (standard)
Critically, HMRC debt is now more expensive than many bank facilities, so tax arrears should be addressed quickly.
Prioritise Payments with Clear Logic
Every business is different, but a sensible hierarchy is often:
- HMRC taxes – interest accrues daily and enforcement escalates quickly. Contact HMRC early if you need a Time to Pay plan.
- Secured lending – missed payments risk covenant breaches or enforcement against secured assets.
- Energy and essential suppliers – protect business continuity.
- Other creditors and landlords – be transparent and consistent.
- Director/shareholder loans – avoid repayments that put pressure on cash.
Document your rationale, it helps maintain discipline and reassures stakeholders.
Tackle Late Payments Calmly and Consistently
Late-paying customers are one of the biggest causes of debt pressure. With new government scrutiny on B2B payment practices, tightening your credit control now is wise.
A simple framework works best:
- Keep payment terms short (14–30 days).
- Issue accurate invoices promptly with correct purchase orders.
- Follow a clear chase rhythm:
- Reminder on the due date
- Follow-up at +7 days
- Final notice at +14 days, then apply statutory interest
- Set credit limits for new or higher-risk customers.
- Consider early-payment discounts or selective invoice finance for peaks.
Document conversations – a small payment now often beats a larger promise later.
Boost Short-Term Cash When Pressure Builds
If your forecast shows pressure, act on both inflows and outflows.
Accelerate Inflows
- Focus on your top 10 overdue invoices (especially those 60+ days).
- Agree repayment plans by phone and confirm in writing.
- Consider invoice finance but understand costs and terms.
Reduce or Delay Outflows
- Negotiate staged supplier payments.
- Move annual costs like insurance to monthly if the uplift is modest.
- Clear slow-moving stock to release cash.
- Cancel non-essential subscriptions and spending.
Use the Right Borrowing Tool
- Overdrafts for seasonal swings
- Term loans for defined investments
- Asset-based lending secured against receivables, stock or plant
- Growth Guarantee Scheme (running to April 2030)
Speak to Lenders and HMRC Before Problems Escalate
Early communication builds trust.
With lenders:
Prepare a short pack including:
- YTD financials and commentary
- A 12-month cash forecast (base and downside)
- Covenant analysis
- A clear request (e.g., interest-only period, covenant reset)
With HMRC:
- Contact the Payment Support Service before a missed deadline
- Explain the situation and propose a realistic schedule
- Keep all future filings up to date
Know When Formal Restructuring Is Needed
If debts cannot be met as they fall due, seek regulated advice early. Possible tools include:
- Company moratorium
- Company Voluntary Arrangement (CVA)
- Restructuring plan
- Administration
- Liquidation where rescue is not viable
Directors’ duties become more serious near insolvency, so keep minutes and act to protect creditors.
Build Better Habits to Reduce Borrowing
Good operational discipline reduces reliance on expensive debt:
- Review pricing regularly
- Keep payment terms short
- Avoid reliance on single suppliers
- Tighten stock levels
- Consider credit insurance
- Hold a monthly debt and cash review meeting
Small improvements each month create long-term resilience.
For advice and support on any aspect of your business finances, our experienced team at Dunkley’s Accountants are here to help. Call us on 01454 619900, or email us to book in a meeting at advice@dunkleys.accountants.