When Trouble Starts

Once you do get into trouble, you can continue to trade, provided that you don't worsen the position of any stakeholders. It's a good idea to get advice from a professional adviser used to managing a company's trading on a day-to-day basis. More importantly, he or she can be objective in a situation which may be quite frightening and emotive for you.

The first step is to identify the cause of the problem. It may be:

An endemic problem in the business - you are underfunded, overstaffed, financially out of control etc
Due to current economic circumstances - everyone is experiencing the same problems
A recent big event, like losing a big client
Problems over people paying you, because they have got into trouble.

 

Working Through the Crisis

Whatever the cause, your adviser will take you through the following process, holding regular board meetings and minuting them to make clear:

• that you recognise the situation
• that you are taking steps to remedy it
• the reasons for any decisions you take
• your short-term strategy to see you through the crisis.

Improve your cash collection - set daily targets, building to weekly results, which you must deliver. Slipping at this stage is not an option: your main aim is improve your cash position.

Rework your cash forecasts on a daily basis, and predict where the gaps will fall. Address where you can move or renegotiate payments, and take the plan to your bank. With a good relationship behind you, they may be willing to help.

Involve your stakeholders. A supplier with whom you have a good relationship may be sympathetic if you ask for more time to pay a bill. Senior, trusted employees who identify with you and your business might agree to defer taking all or part of their salary if you tell them what you are trying to do, and trust them with the whole truth. Of course, if you are asking your staff to help in this way, you and your fellow directors must be the first to drop your own salaries.

Potential savings, such as overhead or staff cost reduction, can produce longer-term results. If you let some staff go, it will be at least a month before you feel the benefit, and may even cost you money in the short term. You also need to be careful not to damage the longer-term prospects of the business if it does survive the crisis.

Take Action Early!

In short, it's not the end of the world if you realise you can't pay a bill or two. But don't bury your head in the sand either. These things can happen, even to the best of businesses. Recognise this and call in a specialist business turnaround specialist as soon as you start to get into financial trouble.

If any of this applies to your business, call CMC on 01491 829181or email us to talk over your options and maybe get further help.