The loan moves to the bank's special assets group on a Tuesday. By Thursday the payables inbox has 40 unread messages from vendors who have compared notes, the largest customer has asked whether the company will be around to honor the warranty, and the controller has produced a cash report that was accurate as of the previous month-end. The owner has been running the business for 22 years and has never been in this room before.
A restructuring is a period when the company's survival depends on the accuracy and speed of its financial information. This article covers what the finance function has to do during that period: take control of cash, run a 13-week forecast that lenders and counsel will rely on, triage vendors, communicate with the lender, understand what a debtor-in-possession budget is if the case goes to court, set a reporting cadence, protect the part of the business that will pay everyone back, and keep the exit paths open. It is a description of financial and operational practice. It is not legal advice, and every restructuring involves decisions that belong with counsel.
Cash control comes first
Before the forecast, before the vendor calls, before the lender meeting, the company needs to know exactly how much cash it has and who can spend it. That means one daily cash report, prepared by 9 a.m. from the bank portal and not from the general ledger, showing every account, every outstanding check, and every scheduled electronic payment. It means one signer on disbursements, or two above a threshold, and a written schedule of what will be paid this week that the owner and the finance lead have both seen.
Turn off every automatic payment and every vendor-initiated debit. Route customer receipts into an account the company controls and reconcile it daily. Fund payroll from a separate account on the day it is due, not before. If there is a lockbox or a sweep arrangement with the lender, understand exactly how it works and what happens to receipts under it, because the answer changes once the loan is in default. Cash that leaves the company without a decision is the first thing a restructuring cannot afford.
The 13-week forecast is the operating system
Every restructuring runs on a 13-week cash forecast. It shows, week by week, the opening cash balance, receipts by customer or customer group, disbursements by category with payroll, taxes, rent, critical vendors, and debt service on separate lines, and the closing balance. Each week, actual results replace the forecast for the week just ended, the variance is explained, and a new thirteenth week is added. Lenders, counsel, and any advisor the lender brings in will ask for it in this form, and they will judge the company's management by how closely the actuals track it.
The line that goes stale first is collections. In a restructuring, customers pay slower, dispute more, and sometimes hold payment as a hedge against the company's failure. Build receipts customer by customer from the aging and from conversations with the customers, not from a historical collection percentage. The second line to watch is disbursements to vendors who have moved the company to cash on delivery, since those payments arrive earlier than the terms in the accounting system assume. A forecast that shows the company running out of cash in week seven is not a failure of the forecast. It is the information that makes week seven survivable.
Vendor triage
Not every vendor can be paid on time during a restructuring, and pretending otherwise produces a payables department that pays whoever called last. Sort vendors into three groups. Critical vendors are those the company cannot operate without for more than a few days: single-source suppliers, utilities, software the business runs on, the fuel card, and the insurance carrier. Important vendors have alternatives but switching would cost time or margin. Replaceable vendors have ready substitutes at similar cost.
Critical vendors get paid first and get a phone call from the owner or the finance lead, not a form letter. The message is factual: here is what we can pay and when, here is what we are doing, and here is who to call. Do not promise what the forecast cannot deliver, because a broken promise in a restructuring costs more than a hard conversation. Important vendors get a payment plan. Replaceable vendors get whatever the forecast allows, and a decision about whether the relationship continues.
One caution that belongs with counsel: payments made in the period before a court filing can be examined afterward, and payments outside ordinary terms may be treated differently from routine ones. Before paying any vendor ahead of terms, paying down an old balance, or settling with a related party, ask counsel. The finance function's job is to flag those payments before they are made, which the weekly disbursement schedule makes possible.
Lender communication
The lender's confidence is the cheapest capital the company has during a restructuring, and it is earned by reporting before being asked. Send the 13-week forecast with the variance report every week, on the same day, in the same format. Send the borrowing base certificate on the schedule in the loan agreement, and make sure the receivables and inventory in it are the same numbers in the general ledger. If a covenant will be missed, say so the week the forecast shows it, not the week the compliance certificate is due.
A lender in a workout wants three things: no surprises, a credible plan, and evidence that management knows the numbers better than the lender's own analyst does. A forbearance agreement, an amendment, or an extension is far more likely when the weekly package has arrived on time for two months than when the first accurate cash forecast the bank sees is the one its consultant built. The company that reports well is the company the bank works with. The company that reports late is the one the bank works out.
What a debtor-in-possession budget is
If the restructuring goes to a Chapter 11 case, the company generally continues to operate its business as what the law calls a debtor in possession. Because most of the company's cash is typically collateral for a secured lender, using it usually requires the lender's consent or the court's approval, and borrowing new money during the case, known as DIP financing, requires court approval as well. In both situations the lender and the court usually require a budget: a week-by-week forecast of receipts and disbursements, commonly 13 weeks, that becomes the approved limit on what the company may spend, by category, for the period it covers.
The DIP budget is the 13-week forecast with consequences attached. The approval order or the financing agreement typically sets permitted variances, for example a percentage cushion on total disbursements or on receipts, tested weekly or on a cumulative basis, and requires a variance report to the lender and sometimes to the court on a fixed schedule. Professional fees for counsel and advisors are usually a separate line. Spending outside the budget beyond the permitted variance can be a default under the financing, which is why the finance function has to track every disbursement against the budget category in real time rather than at month-end.
This description is general. The specific requirements of a DIP budget, the variance tests, the reporting obligations, and the treatment of pre-filing payments are set by the court, the lender, and the applicable rules in each case, and they are matters for counsel. The finance function's contribution is a forecast credible enough to be approved and a tracking process tight enough to stay inside it. The firm's principal has led debtor-in-possession operations and court-required reporting as a chief financial officer, and the difference between a case that runs smoothly and one that does not is almost always the quality of the weekly numbers.
Reporting cadence
A restructuring generates more reporting than the company has ever produced, for more audiences, on tighter deadlines. The table below is an illustrative cadence for a privately held company in a workout or a court-supervised case. The specific reports a court or lender requires vary, and counsel will confirm the list for your situation.
| Report | Audience | Frequency | Contents |
|---|---|---|---|
| Daily cash position | Owner and finance lead | Daily by 9 a.m. | Bank balances, outstanding checks, scheduled payments, available cash |
| 13-week cash forecast with variance | Lender, counsel, board or advisors | Weekly, same day each week | Receipts, disbursements by category, actual versus forecast, explanations |
| Disbursement schedule | Owner and finance lead | Weekly before any payment run | Every payment proposed for the week, by vendor group and budget category |
| Borrowing base certificate | Lender | Per the loan agreement, often weekly | Eligible receivables and inventory, reserves, availability |
| Budget versus actual by category | Lender and, in a court case, as required | Weekly and cumulative | Spending against the approved budget and permitted variance |
| Monthly operating report | Court and trustee's office, in a court case | Monthly, as required | Financial statements and schedules in the required format |
| Operating KPI flash | Management | Weekly | Bookings, backlog, labor utilization, collections, customer retention |
The cadence looks heavy because it is. The alternative is a restructuring in which the lender, counsel, and the court each ask for the same numbers in different formats on different days, and the finance team spends the week reconciling versions instead of running the business. One data set, one forecast, and one calendar reduce that to a routine within a month.
Protecting the core business
The purpose of the restructuring is to preserve the part of the business that will pay the creditors, the employees, and the owner. Identify it early: which customers, jobs, product lines, or divisions produce contribution margin, and which consume it. Stop the bleeding jobs, even at the cost of a difficult conversation with a customer. Concentrate technicians, crews, inventory, and management attention on the work that makes money. A restructuring is a poor time to discover that the profitable division was the one everyone ignored.
Key people leave restructurings, and the ones who leave first are the ones with options. Retention arrangements are a matter for counsel, particularly in a court case, but the finance function can make sure payroll is never late, that the people who matter know the plan, and that the numbers they see are honest. Customers need the same treatment: a direct conversation about continuity, warranty, and delivery from the owner, before the competitor's salesperson has it for them.
Exit paths
A restructuring ends in one of a handful of ways. An out-of-court workout: the lender agrees to forbear, amend, or extend, and the company earns its way back into compliance. A refinancing: a new lender replaces the existing one, usually on the strength of a clean forecast and a stabilized business. A sale of the company or of a division, which in a court case may take the form of a court-approved sale process. A plan of reorganization, confirmed by the court, that restructures the debts and lets the company continue. Or an orderly wind-down, in which the finance function's job becomes maximizing what the assets return.
The finance function does not choose the path. Its job is to keep every path open by keeping the numbers credible, the cash controlled, and the reporting on time. A lender that trusts the forecast will forbear. A buyer that can verify the numbers will pay more. A court that sees clean monthly reports has fewer questions. Every exit is easier when the weekly package has been right for three months.
In a restructuring, credibility is a cash-equivalent. It is built one accurate weekly report at a time and spent the first time a number cannot be explained.
Where an interim or turnaround CFO fits
Most privately held companies between $3 million and $50 million enter a restructuring with a bookkeeper or a controller who has never built a 13-week forecast, never prepared a borrowing base certificate under scrutiny, and never sat across from a special assets officer or a lender's advisor. The owner, meanwhile, is needed on the floor, with customers, and with the people who might leave. An interim or turnaround CFO takes the finance side of the restructuring: daily cash control, the weekly forecast and variance report, the vendor triage and disbursement schedule, the lender package, coordination with counsel on the budget and court reporting if there is a case, and the financial analysis behind whichever exit path the company pursues.
The engagement is built to end. When the cash is stable, the lender relationship is repaired or replaced, and the reporting is documented well enough for the company's own staff to run it, the interim CFO hands it off. The owner keeps a finance function that can produce a credible forecast on a Monday, which is the one capability that would have made the restructuring shorter if it had existed before the loan moved to special assets.