Phil MeekinView Profile
Very few get through life without encountering personal or business cash flow problems; most of us suffer this at some time, and it can be a short-term blip or something more severe.
If it’s not happening to you in the current economy, you’re very fortunate. But you may know somebody whose business is in financial difficulty or experiencing cash flow problems. If you’re affected, it can be a scary experience, and you may be asking where you can go for help?
What causes cash flow problems?
Many events can result in sudden and severe cash flow problems. The loss of a major client, a sudden fall in sales or a period immediately following a costly expansion can leave your business struggling for cash. If you’ve expanded during prosperous times to cope with increasing sales, as times get tougher, you may find yourself over-capacity in terms of premises, plant and staff.
How do you solve cash flow problems?
With commercial credit being challenging to secure, where do you turn if you encounter cash flow problems? You can approach high street lenders for loans; however, their rates may be higher than you can afford. Alternative forms of raising money other than high street banks may be an option. These can include factoring, re-financing fixed assets, or approaching private investors.
Taking out credit may help as a temporary relief, but unless your company can return to profit, it won’t get out of trouble. Sometimes, if it’s evident the core business is basically sound, but the future is uncertain due to its present format or liabilities, it may need restructuring.
If your company becomes insolvent, and its liabilities outweigh its assets, you could be accused of “trading whilst insolvent” if you don’t take the necessary steps to remedy it. Fortunately, formal arrangements exist to help companies cover their liabilities before trading on or closing. These procedures include Company Voluntary Arrangements, Administrations, Liquidations, and Pre-Packs. If you’d like more information on any of these arrangements, please feel free to contact us.
Cash flow problems can be a scary experience if it affects your personal life or business. They can be the result of a decline in sales, overspending, or just a series of substantial outgoings. You can try and secure credit to temporarily plug the gap, but your business must return to positive cash flow for it to continue trading. If your cash flow has deteriorated to a point where your business has become insolvent, you should look into an arrangement to cover creditor liabilities and allow the company to continue or close.