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Independent business reviews

Independent Business Review’s (IBR)

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 3 minutes

Independent Business Reviews (IBR) have been around for decades. They are often used by financial institutions and lenders such as banks, as a vehicle to identify and assess any risks to their investment. They are also used to establish methods of reducing (and ultimately avoiding) risk in the short term.

Should you be concerned if a lender requests an IBR?

Several things can trigger the requirement for an IBR. In the SME sector, it’s often the case that a company will be required to provide monthly management information to its secured lender. A secured lender is someone like a bank or factoring invoice discounting provider. As a result, they provide these to satisfy the lender that the investment risk is minimal.

There are times when the information provided may cause concern, for example, negative cash flow forecasts or a negative balance sheet. If a secured lender does become alarmed about the level of risk to its investment, they can contact a licensed insolvency practitioner, who can conduct an IBR.

When conducting an IBR, the Insolvency Practitioner will:

  • Conduct an in-depth analysis of the business’ performance history, current cash flows, assets and liabilities.
  • Assess the forecast performance, including business model drivers, cash flow; dynamics, working capital requirements and key business sensitivities.
  • Review the business’ financial systems and controls.
  • Analyse the tax position of the business (VAT, CIS, PAYE and NIC etc.)

As business turnaround professionals, we have great knowledge and experience identifying the weak points of any business. We provide feasible solutions and methods to make these areas stronger, in turn, hopefully helping avoid an insolvent situation.

After the review

Once the IBR is complete, the resulting report is presented to the company. What happens next can largely depend on the report’s findings. If nothing of note is found, the business will simply implement the recommended changes, trading more efficiently and profitably in the future.

If the report finds issues or areas that need significant improvement, there could be greater consequences for the business and its lines of funding. For example, the funder may insist on implementing further safety nets on money that is lent. In the worst case, they could demand an immediate return of their investment.

In summary

Independent Business Reviews (IBR) is designed to assess a business on behalf of its funders to identify potential risks to the business and their investment. The review will scrutinise performance and financial figures, among other aspects. While the request of a review isn’t something to be concerned about, once the in-depth report is delivered, the business may have to make changes based on the recommendations. If the report finds too many negative aspects, the funders may instigate more drastic measures.

As with many insolvency matters, highlighting risk early often opens more options to turn around a distressing situation. So, if you’re uncertain why your company is not performing as it should, contact us for free, impartial advice with no obligation, and we can discuss the possibility of having your own IBR.

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