Sometimes it is difficult for business owners to realise that things may be going wrong.
If you are a business owner and the business does not seem short of cash, you may be unaware what’s really happening inside your company – often until it’s too late.
Usually, unprofitable trading, poor debtor collection or other deficiencies in the business soon impact on your cash flow. Occasionally it takes time for these to work their way through so you may be lulled into a false sense of security. If you are busy and don’t have management systems in place you may be caught unawares. Finding whether the source of a business weakness comes from poor execution, poor products or the business structure is key. But when a company is in trouble, many directors fail to drill down early enough into the details. Details like products and services offered, profit and loss, expenses and business structure, as well as cashflow. The advice is as soon as you start to experience difficulties, seek advice.
A timely and realistic assessment of your business can make all the difference. It can help you decide whether to throw your energy into operational changes to stop haemorrhaging cash and assets, keep jobs and save your company. Decisive actions can make the transition to profitability. Or if no other options are available, secure potential buyers for the business.
Our work often shows how a successful business can be hit hard by downturn in the economy. For example, clients operating in many of the hardest hit sectors during the recession, have universally suffered cash flow problems. These are as a result of falling sales, bad debts, customers extending payment terms and projects returning much lower values.
Even companies with healthy order books can find that long term cash flow problems catch up with them. Directors can take steps, such as negotiating terms with creditors and arranging refinancing packages, as they try to continue trading out of the difficult situation. However, these are only short term fixes if they do not address the underlying problem.
Directors often approach us to seek assistance when cash runs out. In order to avoid further trading which may be detrimental to their creditors and suppliers.
At this very late stage, there are usually few options available for us other than to seek a new owner. Sometimes this search is fruitless because of the incredibly pressing timescales to save a cash strapped business. If the company is not in a position to continue trading, redundancies are inevitable.
Our time is then spent working alongside all stakeholders to determine the most appropriate next steps for the benefit of all creditors.