Can you trade out of your current troubles?

HALF A MILLION SME'S ARE IN FINANCIAL DISTRESS!

IF YOUR ONE, CAN YOU TRADE OUT OF IT?

READ ON!

Red Flag Alert has reported that 509,000 UK businesses are in significant distress right now, this is the largest figure ever measured. They have seen the largest quarterly increase since 2017. This is also the first time that monthly insolvency figures were higher than the year previous.

With furlough ending, the moratorium is lifted and businesses running out of money this figure is going to rise much higher. Even with all the government support in place, the number of critically distressed companies jumped 10% last quarter.

Its the SME's that are struggling the most, the small businesses are the ones struggling the most right now, most took bounce back loans back in May and some may have been granted CBILS but this money is running out for them and up to now there has been no other significant financial support on offer. The industries that have been hit hardest according to the stats are unsurprisingly hospitality, construction, estate/letting agents, and manufacturing.

So if your business is one of the 509,000 that this report refers to what are your options?

Trading out of difficulty

All businesses can face cashflow problems even the largest companies can struggle with this so don't feel that your the only person whose business is struggling to pay the bills on time. Since last March when the lockdowns started most industries saw a sharp decline in revenue, new orders were not being places, and companies have struggled to pay their invoices on time. This has caused issues the length of breadth of the UK and affected businesses of all sizes.

Insolvencies figures are lower since covid-19 struck for a number of reasons. Government financial support has helped businesses continue and there has also been a moratorium on winding up petitions, wrongful trading has been suspended and millions of people are still on furlough. Its been widely reported there is a large number of zombie companies who are just waiting to have their life support turned off but there are also companies out there who may be able to trade through these very difficult conditions.

There are a number of questions that you need to ask yourself if your business is in distress and you are unsure of which route to take.

1. Is the business viable, will you still be profitable when we get back to normal, whatever that will be!

2. Would it be better to close the current business and start afresh with the debt burden?

3. Can your business costs currently and how long can you stay afloat?

4. Have you looked at each line of your P & L and attempted to cut costs?

5. Have you still got the appetite to keep fighting through?

6. Have you checked for any additional government support to help you through?

7. Will there still be a demand for your offering when life gets back to normal?

If you can honestly answer these questions and you believe that your company has a fighting chance of making it through and being profitable again then there are a number of things that you can do to give the business some breathing space and improve your cashflow.

1. Do a cash flow for the coming months, take into consideration that people may be late paying you, stay in contact with your customers and check they are happy with what you have done and that they can pay on time.

2. If you have arrears with HMRC pick up the phone and speak to them, if you can't afford to pay them let them know early. They are the most flexible we have ever known right now. Even if you had arrears before Covid there is still a chance that you can agree a new Time To Pay arrangement. We have heard of clients recently who have been able to renegotiate VAT and Corporation Tax over 18 months! Even if you have the money aside i'd seriously ask you to consider getting a payment plan, CASH IS KING!!!!!!

3. Prioritise paying your creditors whom you need to keep trading.

4. If you can't pay some bills let them know early, keep your creditors in the loop. If there is a bill due that you are not able to pay make contact with the creditor early and explain the situation and you will keep them informed of any changes.

5. Focus on sales and marketing- THIS THE LIFEBLOOD OF ANY BUSINESS, the best way to trade through is to make sure that your revenue keeps coming in, with all this stress going on its easy to take your foot off the pedal with new business development, this could be a fatal mistake

If you do all the above and you honestly don't think you are going to be able to make it pick the phone up and get some professional advice. There may be other options available to the business that you were unaware of.

Talking to someone who is experienced in business turnaround will take some of the pressure off you and allow you to talk through your business's problems with someone who might actually be able to help.

As always if you have any questions about what we have suggested or you're worried about the future of your company, please get in touch with us for some free and independent advice,

Don't suffer in silence.

All the best,

Chris