Getting Prepared

Jason Greenhalgh of Begbies Traynor provides 6 tips to help you prepare for difficult times

The last few years have been anything but ordinary for businesses up and down the country, and indeed across the world. The Covid-19 pandemic brought unprecedented levels of business interruption and financial uncertainty, yet this was only the first in a series of challenges which followed, including the war in Ukraine, disrupted supply chains, staff shortages, soaring energy bills, and an impending recession.

Many company directors will be entering 2023 filled with a sense of trepidation, as an uncertain economic and trading landscape is made all the worse for the huge number carrying the additional burden of debt in the form of CBILS or Bounce Back Loans.

While the challenges facing businesses are undoubtedly daunting, there are steps you can take to put your business in the best position possible to weather the storm.

1. Take stock of the situation – A cash flow summary will establish how much money is leaving and entering the business. This is a great starting point from which to determine if the company is in the position of being able to meet its outgoings as and when they fall due and, if not, give a sense of the shortfall the business is up against. Being brutally honest about the short-term outlook for the company could mean admitting the business may be in difficulty – while this is a tough thing to do, it is actually the best starting point for turning the situation around.

2. Talk to creditors – Although you can sometimes feel like you are on your own in the difficulties you are experiencing, rest assured you are not alone. Even those companies who have not been impacted will be well aware of the struggles others are facing, and would much rather know the position your business is in rather than having requests for payment ignored. Keeping a line of dialogue open with creditors can be extremely useful in helping to smooth negotiations further down the line.

3. Talk to debtors – As well as monitoring money leaving the business, it is also necessary to keep a very close eye on money coming in. If you have customers who owe your company money, you need to ensure your collection processes are as robust as they can be. You should remain in contact with debtors and chase for payment where appropriate. Knowing which customers are in a better position to pay can help you focus your efforts and maximise your returns.

4. Streamline the company – Undergoing a streamlining process can help to cut waste and boost your cash flow. Taking a strategic look at a company’s operations will highlight any underperforming areas which may be having a detrimental effect on the business as a whole. Divesting the company of these unprofitable areas will allow money and manpower to be diverted to more profitable areas of the business.

5. Keep staff updated – As much as directors may want to hide the company’s problems from their employees, it is highly likely that staff will be aware that the business is facing certain challenges. Staff worried about job security are unlikely to be working at their most productive level, so it may be advisable to reassure them if the situation becomes obvious. Ensure that paying wages is prioritised and keep staff updated if any changes occur. The alternative is that valuable, hard to replace staff may seek employment elsewhere, compounding the problems for the business.

6. Assess any outstanding finance – You should look at the level of current loan repayments and make a note of when fixed loan repayments come to an end. A consolidation of loans may be appropriate, or shopping around for cheaper finance options.

In conclusion, don’t ignore problems When it comes to company distress the sooner action is taken, the more options will be available to provide help. There is a range of business rescue and recovery options which can be used to turn a company’s fortunes around. This may include a process of financial and operational restructuring, entering into negotiations with creditors, or getting some breathing space if legal action is on the horizon.

A licensed insolvency practitioner will be able to assess your current position, and work alongside you to put a plan in place to resolve the problems of the company.