Is Your Business in Trouble and Possibly Failing?

Reaching the conclusion that your small business is failing is devastating. We know that small business owners put their heart and soul into their business and often risk everything to build it.  

All hope is not lost though. Getting good, experienced, specialist advice can often avoid ultimate failure of a  business and achieve turnaround. Please do contact us to find out how we can help. 

Advice for a Business Which is Failing

We have many years experience in advising small business clients whose businesses are in trouble and reaching the point of, and risks associated with, possible business failure and closure. We’d be happy to talk to you so please do get in contact but a few pointers, from experience, where you may help yourself include :

• It’s important to remind yourself why you started the business in the first place. Somewhere along the line that passion may have been lost under the hectic workflow of staying afloat.
• There is no magic trick to reviving a business. But you need to be clear on your USP, know your audience, budget efficiently, and run a very tight ship. You also need to accept when the situation has gone beyond the point of no return without professional advice.
• Be open to all the options including that you may need to close the business.

 Business Failure? What to do?

No one wants to see  their business close. As such there are a number of options available both through HMRC, and via insolvency practitioners such as ourselves. They include the following:

Time to Pay Arrangement – This is where HMRC agrees a structured repayment plan, usually over 12 months, to help you pay your tax bill. Find out more.

Company Voluntary Arrangement – Where you cannot pay creditors, the CVA mechanism is a formal payment plan, arranged by an insolvency practitioner, so you can pay creditors at a rate you can afford.

Going into Administration – For larger companies, going into administration offers a moratorium from legal action which an insolvency practitioner can attempt to turn the business around through restructuring to avoid liquidation.

Finance / Invoice Finance – Alternative finance has never been easier to obtain. Many businesses, and especially those who cash-flow cycle is hampered by late payment of invoices, find that invoice finance offers a convenient solution,

What to Do When Your Business is in Financial Trouble

(1) Look Your Debts in the Face

Acknowledging your situation, looking it squarely in the face, and taking action is infinitely preferable to putting your head in the sand.

We are regularly contacted by directors who have tried to ignore their financial problems in the hope they will disappear and, of course, they never do. The letters become more threatening, the bailiffs come knocking, and you lose the ability to tackle the problem in your own timeframe.

(2) Keep the Lines of Communication Open With Creditors

Creditors, and especially HMRC, do not appreciate being ignored and become more hostile as a result.

Even if you can’t pay, you need to let them know your situation, establish a time frame to pay, if that’s an option, and maintain clear lines of communication.

HMRC are not inhuman and are open to various options, such as time to pay arrangements, but only if you keep in touch with them about what is happening.

(3) Consider Finance

If finance is an option, you may be able to fund your company through the tough patch. The key criteria here are whether you have finance available to you, in your situation, and secondly whether it is a wise move?

Is the current downturn the result of an untenable problem with your company, or can things be turned around. If they can, are you too close to the situation to see what steps need to be taken?

If you conclude that the company remains viable, and can return to profitability, then finance can be a useful option. Obviously, sign personal guarantee documents very cautiously (or consider personal guarantee insurance) because if the company slips into insolvency these are going to be called in.

(4) Convene the Board of Directors

If this hasn’t already happened, now is the time to gather you key personnel together and discuss the situation plainly.

When your back is up the wall you’re going to need your key staff members working as efficiently and cohesively as possible.

If you’re the MD, you will need to go into that meeting projecting a confident, clear way forward. This is the time to really own your role as leader, for staff who detect fear or hesitancy will never follow you as effectively.

(5) Cut Costs

One way to increase cash flow is to cut costs. This may mean disposing of key assets, or it may mean letting go of staff.

Make a list of all your expenses on a spreadsheet and go through it carefully – with your accountant if necessary. How much can you save and where?

You might consider creating a document called a ‘break even analysis’ which tells you the minimum sales level required not to sustain a financial loss.

(6) Be open to getting help and Find a Licensed Insolvency Practitioner

To close a limited company with debts, you will need an insolvency practitioner by law. IP’s are not just involved with liquidation, however, but are adept are company rescue operations, such as agreeing a Company Voluntary Arrangement, a structured payment plan with creditors.

Seek a firm recognised by one of the professional bodies, and with relevant experience in your sector.

Help for Businesses in Financial Trouble

Sometimes the stress of keeping a failing business afloat can be significantly tougher than accepting it has run its course and shutting it down. At Company Debt, our remit is to help stressed directors find the best course of action through difficult circumstances, so they can get on with their lives.