Running and maintaining a business is seriously hard work – not every venture you go down is going to end up being a huge success, especially in the current climate. If you find yourself in a position where things aren’t quite working out, the business is facing financial difficulties, it doesn’t have to mean the end. There are several different options when it comes to company turnaround and they are designed to suit an array of different circumstances.
The business has serious debts
At some point during its lifespan, a business will undoubtedly encounter some debts, it’s inevitable. Regardless of whether your business is winning over the market, just starting out or has plans for world domination, financial difficulties will occur. These can come through numerous often unpredictable setbacks. It could be late paying clients, the loss of a large contract or perhaps the business growth you predicted didn’t quite transpire.
Sometimes a business can find itself facing financial troubles through no fault of its own. Broken machinery or assets or seasonal deficiencies. Any business owner which doesn’t tackle these problems head-on will find themselves facing further bigger problems in the future. Thankfully there are rescue and recovery options available, which can help give a business that extra push it needs.
Most new start-ups or SMEs find themselves facing troubles with late paying clients. Unpaid or late invoices are a common problem within B2B businesses. Although one or two might not seem like a huge problem, it can gradually slow the whole operation of your business and how the financial process works. If money comes into the business slowly, it means any outgoings will also move out slowly, congesting the entire flow of cash in and out of the business - So what can be done?
For unpaid invoices, it is invoice finance a fantastic option when it comes to dealing with late paying clients. A factoring company will effectively give you an advance, based upon the value of your invoice. Usually, it can be anywhere up to 90% of its value. The factoring company will then go out and collect the invoice, taking what they are owed along with their fees, before eventually returning the change.
Alternatively, to a traditional financing option such as a bank loan, businesses could take a look at commercial financing options such as asset finance. Commercial finance allows business to ease financial pressure when it comes to bringing in new equipment. Instead of spending huge single sums, businesses can pay in instalments, with the option of upgrading equipment or in some cases returning after the agreed payment terms. On the other hand if your business is asset rich but cash poor, there are options to take out loans based upon the value of your assets, freeing up further cash.
Maximise your incomings and outgoings
Making the most out of your incomings and outgoings may seem like an easy task, but it’s not always as simple as it seems. Keeping track of everything that comes in and out of the business is vital to maintaining a healthy level of cash flowing throughout the business.
• Try to make deposits your business norm – ensuring that there is a better flow of cash into the business
• Don’t be afraid to ask for late payments, clients often need a gentle nudge to pay up their invoices
• If it’s beneficial, make full use of your own outgoing repayment terms – if you have the option to pay within 30-days, pay on the final day of the contract
• When it comes to dealing with suppliers, if your cash flow is suffering be honest with them and tell them. Try and work out a payment solution or negotiate a delayed payment
Being savvy with your incomings and outgoings can pay dividends. By maximising the operation of how you handle cash flow will keep a business in a much stronger position moving forward.
Formal payment plans
Sometimes company debt can simply be too much. If the debts are too much and even with the financing options available, creditor pressure is simply too much, entering into a formal payment plan will be the best way forward. For limited companies, there is the option to enter into a voluntary arrangement, an opportunity to condense your business debts into one affordable monthly repayment, over an agreed amount of time. Importantly this can take away creditor pressure.
A last resort option for businesses comes via a pre-pack liquidation and then a phoenix. Technically this means the end of a business, but through a phoenix company, a new one is born through the ashes. A phoenix company is part of a pre-pack liquidation which gives directors the options to pick up the pieces of the formerly liquidated company, meaning they can carry on trading under a new name.
Businesses will always struggle at some point. Even with a thorough and rigorous planning procedure, problems will occur. The sooner they can be tackled the better, if owners and directors simply bury their head in the ground, those issues will get worse.