Is your business struggling? Here’s what to consider
If serious financial difficulties present themselves, most businesses will need to act quickly to overcome the challenges faced.
The key to this is discovering where the issues are and how they have come about – meaning several hard-line questions may need to be asked.
In most instances where cash flow problems are identified, the first port of call should be to contact an insolvency practitioner.
They will have knowledge of the usual problems faced by companies in similar situations and will possess ideas regarding how best to overcome such issues.
Identifying the problem is one thing, but overcoming the challenges that can be faced thereafter can be an entirely different proposition.
Understanding the available options can be confusing, as many business owners and shareholders will still want a reasonable degree of control over their businesses.
While this is not always possible, there are numerous options available, all of which could assist a struggling business.
If a business cannot keep running and administration is not possible, then liquidation becomes the most likely option.
Such measures will look to pay off creditors by releasing as many of the company’s assets as possible.
Essentially, this process protects a business from creditors while a corporate restructuring can take place.
The process works around reducing overheads and may alter the management structure and finances to try to solve the issues faced.
Company Voluntary Arrangement
Entering into a CVA can occur if creditors agree to it because they feel such a method will be better in the long-term than liquidation.
Any unsecured debts are frozen under this legally binding agreement and are then paid back over a certain period of time, agreed by all parties concerned.
The three above options are most common for companies facing financial difficulty, but others also exist and may provide alternative results.
Consulting insolvency specialists is the best option should a company find itself in trouble, as the best outcome has more chance of being found.
By Phil Smith