Acting quickly at the first sign of financial distress is essential when attempting to turn around your struggling business. The earlier you act, the more options are available to you, whether the business is already insolvent or on the brink of a cashflow crisis.
No company director ever wants to find themselves in a position where their business is at risk, and only formal insolvency procedures such as an administration, company voluntary arrangement (CVA) and a pre-pack administration can help them resolve their financial issues.
To avoid a company insolvency, business owners must take considered action, seek advice from an experienced team of turnaround practitioners, and work in the best interests of their company to resolve their problems and make a full recovery. Here are five top company rescue tips courtesy of Company Debt…
1. Take a wider view
When you’re heavily involved in the everyday running of a business, it can be difficult to view the company as a whole and assess exactly where things are going wrong. By taking a step back from the day-to-day activities, it is easier to see where the real issues lie and think about the positive changes you can make to resolve them.
2. What changes can you make now?
It’s all well and good making changes to improve the business for the better in the future, but when you’re facing a cashflow crisis, you need to take steps that have immediate results. Thankfully, there are short-term finance solutions available to almost all small and medium sized businesses, such as invoice financing, merchant cash advances and alternative overdrafts, which could provide you with a route out of a sticky financial situation.
3. Are all your assets essential?
Some businesses get into trouble by investing too much capital in non-essential assets, such as buying stock they do not need, or spending more than is necessary on equipment and machinery. Selling excess stock, even at less than cost price, could free up the finance you need to rebalance your cashflow and move the business in the right direction.
Selling or refinancing assets might seem like a drastic step, but at this stage the reality is that without such positive action, your assets could well be liquidated anyway as part of a formal insolvency procedure. At least taking this step yourself allows you to receive the maximum value for your assets and potentially save your business.
4. Are all your working relationships essential?
For most business owners, selling non-essential assets is a darn sight easier than ending working relationships with suppliers and employees, but in some cases this might be the only option you have. Some small and medium sized businesses are guilty or expanding too quickly, and taking on new members of staff before there is enough work to warrant a full time role.
When you’re really struggling, ending relationships with suppliers and employees that aren’t absolutely essential to the performance of your company is something you should seriously consider. The longer you wait, the worse the situation can become, so acting quickly can help to nip the situation in the bud before more jobs are at risk.
5. Streamline the business
A common fault of company directors’ is their failure to identify where the real strengths of the business lie. The temptation to diversify and take on more activities is strong, but this increases the costs of the business and often detracts from its core operation. In times of trouble, it is essential the directors revert to their core operations to give the business the very best chance of success.
Get in touch for help
The reality is that almost half of all businesses fail in their first five years, and while no business owner will expect to face an insolvency situation, the majority of businesses will have to deal with an unstable financial position at one time or another. The difference between companies that ride out the storm and go no to prosper, and those that fail, is the swift actions of the directors, and the availability of expert assistance.
At Company Debt. we can provide the pre-insolvency advice businesses need to remain on top of their cashflow situation. To speak to one of our experienced turnaround consultants, get in touch today on 08000 746 757.
Written by: Mike Smith