It’s a tough old world out there right now and too many businesses are finding that their operation costs are going up but orders are going down.
It can easily feel that the sky’s falling in, but it’s sometimes possible to turn things around again. Read through these seven steps to see if you can rescue your enterprise.
Look at formal insolvency procedures
This might seem like you’re throwing the towel in before you start, but it’s often better to look at the worst-case scenario so that you have a good idea about it.
Insolvency isn’t the end of the world if it comes to it, especially if you get help and advice from practitioners like Credit Fix. There are lots of different insolvency solutions, so you can find one that gives you the best possible outcome. Once you’ve looked at the worst-case scenario, you can set about trying to prevent it.
Take a step back and analyse the situation
You need to meet with the managers, accountants and directors to have a brainstorm to see where the business is spending too much money, how much debt there is and what’s going wrong. This is a vital step – you need to get the lay of the land.
Look at business restructuring methods
Find out more about debt management, consolidation and financial planning and make sure you can use all the education, software and methods at your disposal to come up with a roadmap. Your plans must be logical and the maths must work out – no cloud cuckoo allowed here!
Liquidate any non-essential assets
This could be equipment, stock, tools, vehicles, property or any other assets that aren’t essential to the company’s continuity. You could have an auction or you could put them onto the open market. Whatever funds you raise can either help pay down (or off) your debts or allow you to invest in new opportunities.
End all unnecessary employee or supplier contracts
If there are any not-quite-essential payments going to employees or suppliers each month then these could be a huge drain on your resources. If you can trim some of them, you can use the money saved for paying down debts or making new investments.
Look at financing options
Regardless of your credit rating, you could use some assets as collateral for a secured loan. Alternatively, if your clients have always paid promptly, but you need cash immediately to stay afloat, then you could ask for invoice discounting. This essentially turns your current sales ledger into ready cash, but it won’t be to the full value of the invoices.
Use the spare parts of the business to create a new one
This is another worst-case scenario, but not that bad. If it looks like you’re going to the wall, or that creditors are going to take legal action and force you to close, then you can arrange administration and a pre-packaged administration sale.
In this sort of sale, your directors can buy some of the company’s assets with their own funds. They then transfer these assets to a new company – often known as a phoenix company because like a phoenix it rises from the ashes of the dead one.
It's crucial as a business to have a good understanding of your financial position when looking to improve your company. If you find yourself struggling with your finances and need to seek help, look at some organisations that can assist such as National Debt Advice.