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Company in trouble? Tips to help you avoid winding up the business

Official figures may suggest that the recession is nearing an end. However, for many businesses, conditions are as difficult as ever and closure is a very real possibility.

Many economists are forecasting that when figures for the 4th quarter in 2009 are published, the UK economy will have returned to growth. Unfortunately, what the statistics say and the reality for many businesses on the ground is very different.

Many companies have cut back on both staff and spending. In order to survive they have reduced the number of new orders that they place and are requesting large price cuts from the suppliers they are working with. To survive in this difficult climate, it is vital that business owners and managers keep a tight control over their companies.

Use of bank account overdraft

If you are continuously using your bank account overdraft, this may be a sign that your business is not making money. You may be just covering costs each month or even loosing cash. You should consider areas where you can reduce cost and spending.

Waiting for a new piece of business

Are you expecting a piece of business to come in which will turn the fortunes of your company around? If so beware that in the current economic climate, potential clients will take much longer to make buying decisions and may require sign-off much higher up in their organisations than in the past.
You should plan to wait much longer than you would normally for a buying decision and expect to have to reduce your price.

Late tax payments

If your business is not up to date with tax payments such as VAT and PAYE, this may be a sign that your business is unable to pay its creditors and is already insolvent. See if you can improve your cash flow by taking advantage of the Government's "Time to Pay" scheme which was extended in the December Pre budget report.

Borrowing to keep the business afloat

If you are looking to borrow money to improve the business' cash position and support current trading rather than for future investment, this may be a sign that the company has a cash flow problem. You should consider what actions you will need to take if new borrowing facilities are not made available.

If having reviewed the current financial position of your business, you believe that continuing to trade under the current circumstances is not viable, there are real steps you can take to save the company.

• Company Voluntary Arrangement (CVA)

  A company voluntary arrangement (CVA) may be used to reduce the business' debts. The company's creditors agree to reduced payments and to write off debts owed thus enabling the company to continue to trade.

• Pre Pack Administration

  The alternative to a company voluntary arrangement is pre-pack administration, also known as phoenixing. This process involves setting up a brand new company which buys the assets of the old and then continues to trade in its place.

  The creditors are left behind in the old company meaning that the new business is given the best chance of success.

If your business has survived the difficult trading conditions of the last 18 months, it is now more important than ever to keep very tight control. Although the headlines may suggest otherwise, business at the grass roots level will continue to be difficult.

It is vital to identify potential problems quickly and act to resolve them. If you feel that implementing a formal solution such as phoenixing or a CVA may help, then take advice from a corporate insolvency expert. Delay could cost you your business.

If your business is in financial difficulty why not talk to us about possible solutions http://coopermatthews.com/business-recovery-services-advice.html

Cooper Matthews specialise in Business Turnaround providing straight forward insolvency advice for businesses in difficulty and business owners with personal financial problems. They have significant experience in working with small to medium sized businesses.

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.

Prior to Cooper Matthews Derek Cooper was the Managing Director of Wilson Philips specialising in personal insolvency and financial restructuring. He previously worked for 11 years as a financial advisor for Allied Dunbar, and later the J Rothschild Partnership. Derek's experience of both corporate insolvency and business management puts him in a position to be able to understand the challenges facing businesses in today's economic environment.

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