Company insolvency very rarely comes as a surprise to company directors and there is no need to rescue your business. Occasionally, a substantial unexpected expense will come out of the blue and severely damage a business’s financial stability, but in the majority of cases a business will run out of cash more gradually.
If your business is nearing the point of company insolvency, it’s essential you take immediate steps to recover your position. At Jameson, Smith & Co, we have been able to turnaround a number of failing businesses at the last minute, helping to save jobs and pay creditors in the process.
So, if your business is struggling with large amounts of debt, or has cash-flow issues that are hampering your business, there is still hope. By using one of the following 5 strategies, you could recover the business and continue trading.
1. Concentrate your efforts on the business’s best customers
Anyone who runs their own business will know that no two customers are the same. There are customers who are incredibly demanding and eat up your time, only to then make payments long after they were due. Then there are those dream customers who leave you to get on with your work and always pay their invoices on time.
If your business is struggling financially then focusing on your most reliable, profitable customers can be an effective method of improving your cash-flow. It can also be beneficial not to take on any new customers, and instead focus on increasing the work you do with existing clients. This approach can help to reduce your sales and marketing investment, while improving cash-flow and increasing your earnings.
2. Explore your funding options
Some struggling businesses are actually in a position where they are ‘underleveraged’, which means there is insufficient capital to grow the business. Having too little debt sounds like a good thing, but it could be the case that there is not enough cash to pay suppliers, employees and other creditors.
If your business is struggling but currently only has a very small amount of debt, borrowing cash from a bank could help you out of a sticky situation. If you already have significant debts, approaching an alternative finance provider could be your best option.
3. Call in outstanding debts
It’s commonly the case that companies allow outstanding debts to go unpaid for significant periods of time, potentially resulting in cash-flow problems. A growth in accounts receivable is a common cause of company insolvency issues. The longer you give a company to pay its debts, the greater the risk it will be compulsory liquidated by another creditor or close itself with a creditor voluntary liquidation.
One way to deal with late commercial payments is to contact your debtors with a reminder notice. If they still fail to pay, consider using a debt collections company to recover the debt. In future, you could offer early payment discounts to increase the flow of cash into the company.
4. Cut costs and repay creditors
Many potentially profitable businesses experience cash-flow problems due to excessive spending. This can be on salaries, equipment, marketing or other operating costs. There are a number of ways to reduce this spending, such as by making redundancies, focusing on core activities or cutting the marketing spend.
Reducing costs is one of the most effective methods of returning a viable business to a profitable position. This can give your business the money it needs to pay important suppliers and other creditors.
5. Offer discounted prices in return for immediate payment
If your business is experiencing cash-flow issues then you need money, fast. Most businesses offer payment terms of at least 30 days, and sometimes up to as much as 90 days. If you’re concerned about the speed of payments, offering exclusive discounts for customers who pay your invoices on receipt, or even in advance of the work being complete, can be an effective solution.
Offering a 10 or 20 percent discount for early payment will be an attractive proposition for the majority of your customers. This discount should be calculated to make sure it’s an offer you can afford, and not just a great deal for your customers and clients.
How can we help?
At Company Debt, we work with businesses that are battling against a negative cash-flow position and unable to make ends meet. We help owners explore alternative funding options such as invoice discounting and cost cutting measures that could keep viable businesses afloat. Please get in touch for the expert, no-obligation assistance you need to resolve this situation. Call 08000 746 757, or email email@example.com; Alternatively get immediate live support on the lower right hand side.