Article by Laura Walshe of The Business Debt Advisor
Recent research by KPMG highlights that as many as one in five UK companies are in a position of financial stress. Economic uncertainty gave rise to a particularly tough year for the building and construction industry and the real estate and property sector, with the failure of a number of high-street retailers impacting on commercial property income and values.
The research by KPMG looked at companies with annual turnover in excess of £10M and found that approximately 21% of those operations were under financial pressure as of 2018. For each company KMPG analysed a range of indicators such as trading performance and profitability, cashflow and overall debt levels, then produced a score which identified financial stress.
Blair Nimmo, Head of Restructuring at KPMG UK said: “When we talk about ‘stress’, we typically mean companies which may have experienced instances of negative cashflow or working capital, defaulting on debt repayments or with a high debt-to-equity ratio. An accumulation of such factors can indicate a company is veering towards distress.”
Although the research focused on larger corporate entities, similar factors can affect entrepreneurial start-ups and SME’s.
For any company it is important to actively monitor financial performance, in order to understand the key strengths and biggest challenges. Having a comprehensive business plan will also be helpful, and dividing a plan into smaller steps can make the process less daunting to tackle.
However, the key when any business is facing financial stress is to take early action.
Bev Budsworth of The Business Debt Advisor said: “Failure to address financial pressure at an early stage will almost certainly result in the position worsening, and possibly even formal insolvency. Too often we see businesses fail which might have survived if action had been taken when problems first arose. It is absolutely vital to take professional advice to maximise the options available to the business.”
If you have concerns regarding the stability of your business please fill out our Contact Form and we will be in touch.
Alternatively, call our FREE ADVICE LINE on 0800 781 0990. Our team has extensive experience in dealing with businesses across all sectors and can arrange an initial consultation at no cost, usually on the same day.