Could the UK Recovery Push Your Business to the Brink of Insolvency?

The economic recovery is good news for many businesses, but could unexpected growth take your business to the brink of insolvency?

How economic recovery affects you.

A healthier economy does not always translate to better living standards. This is precisely the predicament many of us are experiencing today. But could it ever be the case that an increase in sales, and more widely, an upturn in the economy, threatens the financial stability of your business?

It might sound counterintuitive, but more businesses fall foul of insolvency during an economic recovery, or so the press would have us believe. But is there any logic behind these claims? We thought we’d take a look…

Cashflow problems

A significant increase in sales can cause some companies to struggle. It sounds nonsensical, but after a downturn, many businesses simply do not have the structures in place to effectively handle or administer those sales. While businesses that receive payments for goods and services upfront tend to flourish in the initial stages of an upturn, those offering credit can experience an additional strain on their cashflow.

This can be particularly problematic for smaller businesses. Small business owners and decision makers are often ill-equipped and poorly prepared for such an impact on their cashflow. The burgeoning cashflow crisis caused by the increasing credit provision can then be exacerbated by management indecision.

If your business is driven to the brink of insolvency by similar circumstances, there are a number of insolvency rescue solutions to help you weather the storm.

Insufficient staffing levels

One of the biggest challenges facing any small business is maintaining customer service levels amidst an upturn in sales. If your customer service levels drop then ultimately sales will suffer. The dilemma for small businesses is whether to hire customer contact and sales staff on the basis of new growth, or bide their time to see whether the upturn will last.

Small businesses are renowned for combining their roles and making limited resources stretch as far as possible; however, this is often to the detriment of productivity. The use of technology to improve the efficiency of your systems will allow employees to focus on generating sales and serving your customers.

Outsourcing is another potential solution to a staffing shortage during an upturn. Effective outsourcing will free up your employees to concentrate on customer facing roles such as service and sales, while specialists take care of marketing, payroll and human resources activities.

What are your options?

A thorough and regular assessment of your needs is crucial to nipping potential problems in the bud before they endanger your business. Whether you hire more staff or give new responsibilities to existing employees, you should always dedicate time to training new staff to maintain your standard of service.

Temporary workers – An effective method of satisfying an upturn in demand without committing to a long term change is to hire temporary workers. This approach can buy you the time you need to see whether sales will continue to grow.

Invoice factoringInvoice factoring, trading and discounting are three of the fastest ways to release cash tied up in unpaid invoices. If your sales are soaring but your cashflow has taken a hit, invoice factoring is an alternative source of finance that can support your business while it grows. A bank loan may take months to process when you really need a quick fix.

If your business is on the brink of insolvency despite an increase in sales, our range of company rescue solutions can help you trade your way out of trouble. Please call 08000 746 757 for confidential