If you’re struggling to meet debt payments and cash flow is suffering, 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.
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.
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.
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.
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert 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 was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.