If your business gets into financial difficulties, by law you need to decide early whether to stop trading. Of course, the best scenario is that, with appropriate help brought in early you can turn your business around and restore it to solvency. However if ending the company is the only option, the sooner you close a non-viable business, the better it is for your creditors and, ultimately, for you.
Key Steps to help rescue your company
The will to change
To successfully rebuild your business, you must firstly be willing to make changes and accept help from professionals. On average, it can take 18 months to rescue a business so you must have long term commitment.
Select a professional advisor
It's a good idea to get advice from a professional advisor with everyday experience of managing a company in difficulties. Each core function of your businesses will be reviewed to help identify problems – Strategy, Finance, Sales & Marketing, Process and People. Whilst looking at your business in detail an advisor will ultimately focus on two things – making your company profitable and keeping you focussed on the rescue plan.
Accurate Accounts
A professional advisor will want accurate and up to date accounts if they are to form any view. If you do not have these this will be an absolute priority. Often this may be the root cause of the difficulties.
Identify the cause of the problem
This may be an endemic problem in the business such as underfunded, overstaffed, financially out of control or current economic situation, a loss of a major client or clients failing to pay you.
Keep board members informed
Hold regular board meetings and minute them to make clear that you recognise the situation, that you are taking steps to remedy it, the reasons for any decisions and your short-term strategy to see you through the crisis.
Improve your cash collection
Set daily targets, building to weekly results, which you must deliver to improve your cash position. Rework your cash forecasts on a daily basis, and predict where the gaps will fall. Move or renegotiate payments and discuss with your bank. With a good relationship behind you, they may be willing to help.
Involve your stakeholders
A supplier with whom you have a good relationship may be sympathetic if you ask for more time to pay a bill. Senior, trusted employees might agree to defer taking all or part of their salary. Fellow directors must be the first to drop their salaries if your employees are asked.
Evaluate potential savings
Savings such as overhead or staff cost reduction can produce longer-term results. However staff reduction savings will take at least a month before you feel the benefit and may even cost you money in the short term. You also need to be careful not to damage the longer-term prospects of the business if it does survive the crisis.
Take Action Early
It may not be the end of your business if you can't pay a bill or two but you must not bury your head in the sand either. These things can happen, even to the best of businesses. Recognise this and call in a specialist business advisor as soon as you start to get into financial trouble.
If any of this applies to your business please call our partner company, CMC Partnership on 01491 829181 or email him at derek.allen@cmc-partners.co.uk to talk over your options and maybe get further help. Visit CMC website at www.cmc-partners.co.uk
