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What To Do If Your Business Or Company Is In Financial Trouble

20 January 2021

Company in financial trouble

Given the recent Covid-19 pandemic it is possible that you’re struggling to meet debt payments and cash flow is suffering.  However, don’t panic! There are a number of options available to help turnaround the business if it is in financial trouble. 

Cut costs and improve cash flow 

Update your cash flow model and use a daily template so you know exactly what is being spent every day. Keep a close eye on accounts and cut out non-essential costs. You’d be surprised by how many things you don’t need.

See here for more tips on cutting costs. 

Debtor collection

Collecting late payments is a vital part of the business but it can also be time-consuming. Ensure you have a suitable credit policy and always have agreements in writing. Verbal correspondence will make chasing debtors more difficult. 

Find out other ways to improve debtor collection. 

What actions should I take to save the business

Plan A or time to pay

If creditors are threatening legal actions, it’s worth looking at what we call, Plan A. This is an informal deal with creditors as a way to pay back debt over a relatively short time period. We may be able to arrange a Time To Pay (TTP) deal with HMRC on your behalf if you've fallen behind on VAT and PAYE payments.

Company Voluntary Arrangement (CVA)

Similar to Plan A, a CVA is a formal deal made with creditors to ensure debt is repaid over a set time-frame. The arrangement protects your company from legal actions and is a powerful restructuring and refinancing tool. Unlike a Time To Pay deal, up to 60% of unsecured debt can be written off. For a detailed CVA guide, click here.

Pre-pack Administration

If the company is under threat from an aggressive creditor, selling the company in a pre-pack administration deal to a third party may be the best option. This ultimately gets rid of debt and allows the business to continue. It can end those sleepless nights quickly! Read our step-by-step guide here.

Refinance

Sometimes it is a poor relation with your lender that can cause issues.  Maybe they consider your business riskier than it actually is so they are charging a high rate of interest or in the case of a factor they are not letting you draw down enough on invoices.  If this is the case it is always worth talking to us as we do know lenders that are prepared to take on struggling businesses.  They do often ask for a personal guarantee so bear that in mind.

What If I am a soletrader? 

If you are not incorporated and are running a business as a soletrader, then the risks are higher if the business is in trouble as you will be personally liable.  Instead of a CVA you may need to propose an IVA and if this is not affordable then you may go bankrupt.  See our help for soletraders page

: Insolvency process

A Worried Director

The Ultimate Guide For Worried Directors

Worried about poor cashflow? Feel you have got into a bit of a mess? Covid-19?, How to pay wages on pay day? For reassuring advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539

Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions.  A new 20 day moratorium for distressed businesses has also been introduced. 

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