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Guide to cost cutting for my company

Published on : 28th May, 2022 | Updated on : 17th October, 2023
Categories:
Keith Steven

Written ByKeith Steven

Managing Director


07879 555349

Keith is the Managing Director of KSA Group Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.

Keith Steven
cost cutting

When the economy is facing tough times is important to keep costs under control. 

I know how difficult it is to let Marge or Reg go, he has been with you for years; or Paul who arrived last year, or that whole department set up for that exciting new project that never floated off the ground. However, if your company is struggling you must take steps to preserve your business now. That may mean letting people go – regardless of sentimental attachments.

Read on for Company Rescue’s top tips, from the turnaround experts!

Listen guys, whatever the size of your business I can tell you something; you can always cut costs. No matter how many business people tell me they have already cut costs, I can always find more savings in their company. So don’t forget, control cash daily and be tough on costs to save your business.

Keith Steven Company Rescue September 2022

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Our TOP 20 Cost Saving Rules and Cash flow Tips.

Common sense says: Only following a couple of these tips won’t work, using as many as possible will; The truth is the solution will come from a mixture of cost savings, driven marketing and sales, SHEER HARD WORK and a bit of luck thrown in. Once you regain control of the situation you can start to manage your cash flow problem.

We are still in, or just emerging from a serious recession now in the UK, does your business strategy reflect this? If not follow this guide and you will be better able to cope.

  1. Set up a daily cash flow to control all cash going in and out of the business; This my help protect you from wrongful trading, as it stops bounced cheques. If you don’t have a daily cash flow forecast click here for your free copy (downloads Excel spreadsheet) , email Keith Steven (keiths@ksagroup.co.uk) now or call KSA on 0800 970 0539 FOR YOUR FREE DAILY CASH FLOW MODEL.
  2. Make sure that all purchases are approved by you as the MD/FD/operations director/owner, and your partners. You should sign all cheques or approve all BACS/CHAPS payments in writing.
  3. No purchases are approved unless signed by you, which will make them produce a purchase order. Then you can check if they are doing their job, is the price fair, are they and your supplier ripping you off, or are they just lazy and not getting the business best value?
  4. No petty cash is drawn from the bank unless you personally go and get it – makes you question what every pound is spent on when people ask for cash, won’t it? By the way, you get out of the daily grind and time to think.
  5. Review all expense claims by the staff; reject all that are not really necessary. If you get complaints or murmurings (they may be too scared to act professionally and debate with you), then meet with them and explain the position.
  6. Remember survival is KEY. If you lose people or profits that’s not a vital issue, CASH IS KING for now. Profits will soon begin flow again from very tight cash flow management. If people sue for unfair dismissal, get help. KSA may be able to kill off their claims with straight talking. Or perhaps a CVA can kill these claims too.
  7. Ask every supplier for a review of their prices. Ask if they can cut you a better deal? You could also consider asking them too for a few extra weeks payment grace, or ask for regular monthly payments
  8.  Ask your landlord for a breather on rent. See if you can pay monthly rather than quarterly for a while? This helps cash flow. Technically this actually puts you in rent arrears, but that’s OK at this stage. Most landlords are very keen to retain their tenant and may be more forgiving than you expect.
  9. Similarly, ask your accountants to accept monthly payments. If your accountancy fee is £10,000 per annum, then ask to pay over say 10 months, that’s just £1,000 per month.MANAGE cash EVERY DAY! It may be that you need someone to do your bookkeeping for you. Have a look at our page on bookkeepers here
  10. Get someone else’s view on the situation; Do you have a trusted friend or mentor? If so talk to them about your business, actions and get them to sanity check you. They may be able to help you and suggest cost savings.
  11. Question whether you need your company car; Can you use your own and give it back? It may save you a lot of personal tax too.
  12. Ask yourself if you can you sell any assets, to raise cash? Make sure they’re not owned by a leasing company first. Shop around for the best deal.
  13. If you are factoring or invoice discounting, ask your factors to cut their costs, only drawdown funds weekly.
    1. Using your FREE daily cash flow model will of course help in this. CALL NOW FOR YOUR COPY 0800 970 0539
    2. This can save hundreds of pounds a week.
  14. Cut ALL overtime to the bone, why do you need it? Is your production planning so poor or weak? If you need more people hire them, at lower rates.
  15. If you need to make redundancies and cannot afford them, use the DeBIS  Hardship Scheme.
  16. Ask HMRC for a Time to Pay Deal, use our programme here is you don’t know what to do.
  17. Use the internet to buy or price everything; you can get fantastic value over the net.
  18. Work all hours, to build the recovery plan and set out the Time To Pay Deals with TAX AND VAT if you cannot pay tax debts on time.
  19. KEEP MINUTES or notes OF ALL DECISIONS. If you’re a partnership or sole trader KEEP NOTES.

We get paid to do this for companies large and small. We use the same process every time because it works and it can work for you. Take no prisoners, work hard, manage cashflow and you will hopefully lead your business out of the dark times.

See our page here – Ten Top Tips to Manage Cash Flow problems

If you have already cut costs, but you need help now, please call 0800 9700539 for quick accurate advice on your options.

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Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

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Notice of Intention To Appoint Administrators
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What Does Going Into Administration Mean?

Going into administration is when a company becomes insolvent and is put under the control of Licensed Insolvency Practitioners.  The directors and the secured lenders can appoint administrators through a court process in order to protect the company and their position as much as possible. Going Into Administration - A Simple Guide Administration is a very powerful process for gaining control when a company has serious cashflow problems, is insolvent and facing serious threats from creditors. The Court may appoint a licensed insolvency practitioner as administrator. This places a moratorium around the company and stops all legal actions.The administration must have a purpose and the Government encourages the use of company rescue mechanisms after administration. The 3 purposes (or objectives) of Administration Rescuing the company as a going concern. Company rescue as a going concern – this is usually a  company voluntary arrangement. The company enters protective administration and is then restructured before entering into a CVA. The CVA would set out proposals for repayment of debts to secured, preferential and unsecured creditors. When the company has its CVA approved by creditors, then the administration process comes to an end after 28 days. Achieving a better result for the company's creditors This is as a whole than would be likely if the company was to be wound up (liquidation) See the differences between Administration and Liquidation.  This better result is usually obtained by selling the BUSINESS as a going concern to one or more buyers. The company and the debts are “left behind”. The better result may include securing transfer or employees under TUPE, as well as selling goodwill, intellectual property and assets. Controlling and then selling property/debtors. This is called realising assets. Then the administrator makes a distribution to one or more secured or preferential creditors, in order of creditors priority. Usually the business ceases trading and employees are made redundant.Only if the first two options are deemed unattainable, can the administrator use this third option.Under the administration option, it is possible for the company and its directors (or a creditor like the bank) to apply to the court to put the company into administration through a streamlined process.However, the law requires that any finance provider (like a bank or lender), with the appropriate security, is contacted and the aims of the administration be discussed and approved. The finance provider must have a fixed and floating charge (usually under a debenture) and the charge holder will need to give permission for the process to go ahead. Five days clear notice is required.  Be aware, though, that a secured lender can appoint administrators over a company without notice if it thinks its money is at risk.  So communication with the secured lender is essential.  

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What Does Going Into Administration Mean?
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What is Receivership?

in What is …? What is receivership?

Definition of Receivership Receivership, also known as administrative receivership, is a legally sanctioned procedure where an entity, typically a lender like a bank, appoints a receiver. The primary role of this receiver is to "receive" and liquidate the company's assets, if necessary, to repay the lender. This process is particularly beneficial to creditors as it aids in the recovery of defaulted funds, potentially preventing the company from facing liquidation. The introduction of a receivership simplifies the lender's task of securing owed funds in cases of borrower default.Receivership should not be confused with administration and a receiver can only be appointed by a holder of a qualifying floating charge created before September 2003. Changes to this procedure were brought in by The Enterprise Act 2002 which promoted company rescue and saving struggling businesses.  Given the charge has to be almost 20 years old receiverships are now very rare with 2-3 only each year. Why would a company go into receivership?The company requires finance for its activities and borrows from a bank (or other secured lender). In consideration for providing the loan, the bank requires security. Normally the company will sign a debenture with a fixed and floating charge. This offers the bank security over the assets of the company. If the terms of the agreement are breached or the company does not conform to the bank's wishes, the charge holder can:Appoint investigating accountants to ascertain how secure or not the bank's debt is and determine the best route forward (not always receivership). Demand formal repayment of the loans without notice. Appoint a receiver to administer and receive the company's assets.The receiver has a duty to collect the bank's debts only,they are not generally concerned with the other unsecured creditors or shareholders' exposure.Receivership - A typical appointment Having borrowed against a business plan that has not worked, a company finds that it is suffering cashflow problems. In an effort to survive, the company reports its problems to the bank and the bank asks for more information on the problems the company faces. Struggling with the problems of firefighting, the directors find it difficult to produce the information. Often the accountancy and reporting systems are not robust and a lot of time is needed to work out where the company is going, what the depth of the problems is and the necessary reporting to the bank is delayed.As time goes by, the company's overdraft is constantly at its limit, because monies don't come in fast enough from customers. Clearly this should set alarm bells ringing at the company - it most certainly does at the bank. They call this ceiling borrowing, and take it as a sign that the directors are losing control.  When this happens the bank will review the account and will typically take some or all of the following steps: What the Bank will doThe bank will ask for a reduction in its exposure. It will ask for increased security from the directors or shareholders. Usually this takes the form of personal guarantees to support the security that the company has given through the debenture. It may ask for new capital to be introduced by the shareholders. Problem is though, occasionally, this only has the effect of reducing the bank exposure as the bank takes this cash to reduce the borrowing. It can ask for a new business plan from the directors, along with regular reporting. It may ask for the company to consider receivables finance (factoring) to remove its borrowing and move to a factor. Often the bank's own factoring company. If they are still not satisfied that the directors are in control and if the bank is concerned about its exposure it will ask for investigating accountants (or reporting accountants) to look at the business. Normally this is a large firm of accountants who send an insolvency practitioner (IP) into the business to ascertain:Is the business viable? Is the company stable? Does it have a long term future if the present difficulties can be overcome? Is the bank's exposure sufficiently covered in the event of a failure? In this report the IP calculates what the assets of the business are worth on a going-concern basis and in a forced sale scenario (or closure basis). Investigating accountants often recommend that the bank sticks with the business, but that the bank should limit any further borrowing to the fully secured variety - in other words the directors must secure it personally against property for example. If the IP thinks that the company is in serious risk of failure and that the banks may lose money in that event, he/she will usually recommend to the bank that they appoint a receiver or administrator. Usually the bank (bizarrely) requires the directors to "request the bank to appoint a receiver". This is face-saving, and designed to deflect criticism from the bank to the directors.At Company Rescue, we believe that it is wrong that the insolvency practitioner that carries out the investigation could also be the receiver - We think it is essential that his/her role as investigating accountant is limited to just that. However, fortunately most banks now agree that this is not a good approach. Once they are appointed what is the receiver's role and powers?A receiver will quickly ascertain what the prospects for business are and decide whether to sell some or all of the assets, the business as a whole, or to continue to trade whilst a better deal can be achieved. Because of the rules and case law, he may wish to get rid of the assets and staff as soon as possible. (They will have to adopt employment contracts 14 days after the appointment). They may remove directors and employees without impunity. They ultimately decides the way forward and will (often) not take advice from the directors. They must pay the preferential debts (employees claims for arrears of pay and holiday pay) first from any floating charge collections. If a deal is to be done with directors the receiver must first advertise the business and its assets for sale. They must conform to the tight rules and regulations governing receivership and report to the DBEIS. A receiver must investigate the conduct of the directors of the business and file a report with the DBEIS.Disadvantages of Receivership The company is rarely saved in its existing form. Its assets will be subject to "meltdown" ( most people know that in receivership or liquidation assets are sold at a knock down price), often jobs and economic activity are lost.The directors will typically lose their employment and any monies the company is due to them, and the company may cease to trade. In addition the director's conduct is investigated.From the creditors' perspective, it is unlikely that any unsecured creditors will receive any of their money back and often they lose a valuable customer. Clearly the cost of receivership can be very high and the bank has to underwrite the receiver's costs. Advantages of Receivership The bank can take control where directors have maybe lost control. The receiver also has power to act to save the business quickly. The bank can ensure that its exposure is (at least) not increased and hopefully recover all of its money. For directors, the advantages are that it mitigates the risk of wrongful trading and may crystallise a very difficult position allowing them to get on with their lives.Preferential creditors may see their debts repaid by the receiver.Still got questions? Click here for Receivership FAQs. If there are still unanswered questions contact us by email or call 08009700539.If your business is in trouble and the relationship with the bank is breaking down, we suggest that you look carefully at the guides in this site. Receivership may be an option. Work out the viability of the business - can you trim costs? Work out the problems, set out the position and have a meeting of directors. Decide if the business can continue but needs to be restructured or if just not viable then consider administration or if the company's lenders have a debenture pre-dating 2003 then receivership. These questions and answers will give more detailed background to the Administrative Receivership technique. If you have any further general or specific questions email us or complete the contact form. Q: How does it happen? A: Receivership can happen very quickly once the bank loses faith in the directors. The best policy is to work with the bank and produce a survival plan having taken professional and expert advice. Q: But the bank can't just appoint a receiver can they? A: Yes - read the terms of the debenture closely - you will be surprised how little power you have to prevent it. In truth the bank will generally have exhausted all possible avenues to help to try to preserve the business. If the directors are manifestly not up to the job or will not listen, will not take professional advice, they will lose patience quickly. Q: Can we stop them? A: Not normally. However if you talk to an experienced turnaround practitioner they can often persuade the bank that their involvement will lead to a review of viability followed by a professional recovery plan and the bank will usually give time for this to happen (within strict financial constraints) Q: How can we avoid receivership? A: Follow the guidance on this site. Discuss the problems with your key people. What caused them and how you can get round them. Build a plan for survival. Discuss this clearly with the bank. If in doubt about the correct route speak to a turnaround practitioner or a quality insolvency practitioner who lists rescue and recovery as a specialty. Be warned most are still looking for liquidations and receiverships (undertakers)If the bank wants to put investigating accountants in; wait until you have a built workable plan and then sell this HARD - to the investigating accountant.Above all demonstrate a professional and determined approach to saving a viable business - procrastinate at your peril - the bank will not wait for that silver lining. Q: I have heard that receivership is a rescue procedure - please explain? A: Many insolvency practitioners describe selling the business or its assets to a third party out of receivership as a rescue technique. Although some part of the activity may remain I cannot understand how the loss of almost all creditors' monies, jobs and all shareholders' funds, followed by the liquidation of the company, can be described as a rescue! Q: What happens if the receiver does not get the banks money back in full? A: He/she may rely upon the banks other securities. Obviously if the directors, shareholders or even a third party has signed a personal guarantee to pay money to the bank in the event of a failure to recover its loans, then the receiver pursues this as if it were an asset of the company. The receiver may also look at the possibility of legal actions against the officers of the company or debtors or creditors to recover funds Q: What happens to my personal guarantees in receivership? A: Unless the receiver recovers all loans due the bank after his/her fees (and any payments due to preferential creditors) then your PG will crystallise. In other words the receiver may seek to recover money from you. Q: What happens to the employees? A: This is a complex question that cannot be answered without a great deal of information. If the business is sold in a reasonable time then their employment rights can be continued with the new owners (under TUPE). If the receiver makes them redundant straight away they can claim for payments from the government (subject to a maximum amount). Again this is a complex question - email us if you want more detail.Please call us on 020 7887 2667 (London) or 08009700539 to talk to an expert turnaround advisor if you would like to talk through your company's options.

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What is Receivership?

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