If your business is in debt, the important thing is to take action immediately. In tough financial times, even the most robust businesses can be affected. But there is help and advice available.

25% of Sage customers say they are worried about the performance of their business. Here Nicola Connop, team manager at Business Debtline, offers her advice.

Create a budget sheet

If you see any problem with the debt you are taking on, the first step is to complete a thorough budget sheet. This identifies any surplus income that can be used to ease how much money is owed.

Business debts should also be split into two categories: priority and non-priority.

Priority debts

Non-payment can lead to the loss of services, assets and essential goods. For example, non-payment of fuel supply can lead to disconnection, which could make it very difficult to continue trading.

Non-priority debts

These may initially affect a credit reference file, and can lead to debt collection agencies and possible court action. This includes credit cards and unsecured loans.

Take action as early as possible

The earlier you take action, the more options there are for dealing with debt and getting things back on the right track.

It can seriously harm a business and an individual to knowingly take on any liabilities that cannot be satisfied. That said, it’s never too late to make a difference, and no matter how bad the situation is, there will be options available.

Options available to manage debt

The options open to you depend on your particular circumstances and whether the business operates as a sole trader, a limited company or a partnership.

The routes firms can take include:

Informal negotiation

You’d deal directly with creditors to agree a way of paying debts off on an instalment basis, with priority creditors dealt with first.

If you’re a sole trader, you may be personally liable for debt if it is all your own. You may wish to negotiate directly with creditors or consider a debt management plan, where a third party negotiates with creditors to agree a repayment plan.

Company Voluntary Agreement (CVA)

This is a form of insolvency that offers creditors a percentage of the debt owed.

Administration

This is a process that appoints an insolvency practitioner to try and rescue the company as a going concern.

Get advice and support

Dealing with debt can be a highly technical process. Always get free advice before making any big decisions.

Online information

Advice about debt issues is available on the Gov.UK website

Telephone advice

Business Debtline is an independent charity providing free advice. Our advisers can:

• help complete budget sheets
• provide advice on rights and responsibilities
• talk through how to get a business back into financial health

Call 0800 197 6026 (Monday to Friday 9am to 5.30pm).