Positive Steps to Help Your Business
Small businesses’ make up the overwhelming majority of those operating within the UK, and they play a fundamental role in our economy. The uncertainty the UK will face over the coming years is likely to see some of these businesses stumble, and possibly fail. However, failure is not inevitable, and there are a number of steps that business’ can take in order to reduce their risk.
It is vital that you are aware of the financial position of the business. You should be able to identify where profit can be maximised, where expenditure can be reduced, and the impact of every decision you take. This can be achieved by having your annual accounts prepared and filed quickly after the year end. It is also helpful to have quarterly management accounts prepared, but if this is not within budget then keeping weekly / monthly control of your key performance indicators is crucial.
Make sure you adopt a system that clearly outlines the procedure for dealing with overdue accounts. It will help you to identify problem customers, and minimise the potential impact on your business. Do not extend credit limits without careful consideration, no matter how well you know the customer, or how long you have traded with them. Too often we see a business go under because they extended credit for the sake of a friendly relationship. It is worth having a slightly difficult conversation in order to save your business. Alternatively, carry out a credit reference check to assess the risk?
It is essential that both parties (i.e. buyer and seller) agree terms, before, trading commences. This will mean that both parties know exactly what is expected of them, and help to prevent disputes. Terms and conditions which are simply printed on the back of invoices are not sufficient to demonstrate that those terms were properly incorporated into a contract.
Insurance, Factoring and Professional Services
You might consider obtaining credit insurance or invoice factoring which can help you reduce the risk, and effect, of non-payment. Alternatively, you could use a professional debt collector, or solicitor, to collect unpaid invoices and aid your cash flow.
Incorporate & Embrace Change
In the world of business, things are constantly evolving. If you fail to embrace change, you might find that you are left behind as competitors take the lead. You should keep yourself abreast of changes in your industry, current trends, and new technologies. It might be worth considering whether or not there is professional body which your business can subscribe to, and receive regular updates to keep your competitive edge.
If, despite best efforts, you find that your business is struggling, do not ignore the warning signs! If the business is experiencing pressure from creditors’ or employees’, or threats of legal action – you should seek advice as soon as possible.
However, we do appreciate that it is extremely difficult to take tough decisions, for example to resolve that a company should cease trading, or make employees’ redundant. We recommend taking positive action and speaking to a qualified Insolvency Practitioner who can discuss all of the options available.
Speaking to the team at The Business Debt Advisor does not mean your company has to be wound up. We will help you identify whether or not the business is profitable, and whether it could go on to trade on a cash positive basis, and whether a rescue procedure such as Administration or Company Voluntary Arrangement would be an appropriate solution.
If you are a director, you have an obligation to act in the best possible interests of the company. If the company eventually becomes insolvent, you may need to demonstrate that you have taken action at an early stage to mitigate any losses. Should you fail to act, or allow the business to continue trading when there is no reasonable prospect of it avoiding insolvency, you could face penalties. Further information regarding directors’ responsibilities is below.
Dealing with Legal Action
If your business is facing legal action, you should take positive action to deal with it as quickly as possible. Although the temptation may be to put the problem to one side until you are less stressed, you will almost certainly feel better once it is dealt with.
In almost all cases, the most important step is to maintain communication. It is important to talk to the person on the other side of the action, and let them know you are keen to resolve the issue. If it is appropriate to do so, put forward a sensible and achievable offer. If you are unwilling or unable to put forward an offer, you should consider contacting the team here for advice.
If the business receives a Statutory Demand or is served with a Winding-Up Petition then always speak to a licensed Insolvency Practitioner.
Please note: This guide is intended to provide basic information only. Where specific advice is required, we recommend you seek professional advice from a licensed Insolvency Practitioner, or other suitably qualified person.
Careful consideration must be given to all options available to a financially distressed business. For more advice, fill out our Contact Form and we will be in touch. Alternatively, call our FREE ADVICE LINE on 0800 781 0990.