14 May 2018

If your business is having cash flow issues, it’s time to act

If you find your business suffering cash flow issues, don’t try to ignore them and hope you can trade your way out of financial problems. If that works, great, but it often doesn’t and doing nothing is the wrong option; even if it is only a temporary downturn in company fortunes.

The fact is that suppliers can present a winding up petition in court leaving you exposed to compulsory liquidation and closure.

Suppliers can present a winding up petition if the customer fails to meet their 21-day statutory demand for payment of a debt of £750 or more.

There are several options that companies (or individuals) should investigate long before they find themselves facing compulsory liquidation.

The most important thing is to keep in contact with creditors.

The supplier might be willing to extended payment terms, giving you invaluable “breathing space” to get back on your feet. Often, it helps if the approach is managed by an independent Insolvency Practitioner who might just provide the supplier with the belief that the company is able to pay over the longer term.

Failure to respond to supplier communications helps no-one and can only exacerbate the problem. What’s more, you might be surprised by their willingness to negotiate if it means they see a way to get their money.

Company Voluntary Arrangement (CVA)

However, if there is an impasse, it might be time to take out a Company Voluntary Arrangement, which can halt legal action planned by your creditors, and consolidates debts into a single monthly payment. As long as the terms are met, suppliers cannot take further action. Also, interest and charges on the money owed is frozen in some cases.

Asset-based borrowing options

The inherent value of business assets could be used to secure a loan, using a piece of machinery or equipment, or selling your ‘book debt’ to a factoring company.

Invoice factoring improves cash flow and provides an injection of cash into the business, which could be used to repay money towards the debts. An added advantage of this financing option is that if your sales increase, the amount provided by factoring would increase in line.

Creditors’ Voluntary Liquidation

In the unfortunate circumstance that the business is not recoverable, a Creditors’ Voluntary Liquidation might be the best option. This reduces the chances of your being accused of wrongful or fraudulent trading later, because you have chosen to put creditor interests before those of the company.

Most businesses experience dips and downturns in their cash flow, and most recover without recourse to drastic measures.

It is never too early to call in the experience and knowledge of an independent Insolvency Practitioner. They know the best way out of most tricky situations and bring hugely welcome relief to harassed and worried company directors.

I often meet people at the worst time in their professional life, and it’s my job to help them towards the best outcome for the company and their staff. Often just talking things through with an expert is enough to start to clear the air and see a way forward.

Vincent Simmons, Director

At Bennett Verby, we offer a totally free, no-obligation initial consultation at which we will seek to understand the situation you find yourself in and suggest possible options.

If the worst does come to worst, an Insolvency Practitioner will take control of the company, sell its assets, pay off as much of the debt as possible, and close the company in due course.

That is absolutely the final option we are prepared to consider. That is just one reason why, rather than “Insolvency Experts”, which is what we are, we call our division “Corporate Recovery”.

If your business is suffering cash flow issues, the time to act is NOW. Speak to one of our experts on 0161 476 9000 or contact us here for a free, no-obligation discussion, and let’s see what your options are.

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