Scottish-based Locksmiths Cashflow Problem

The Challenge

A long-established locksmith company in Scotland was bought by new directors in 2009. They had great plans, including to adapt the business by increasing focus on installing more advanced door entry systems, leveraging the directors’ combined experience in locksmithing and electrical work. However, in 2013 cash flow problems arose. The issues were twofold:

• A decline in business due to the recession and the loss of a large contract.
• Exacerbating the problem was a person in charge of ordering who failed to reduce stock orders in line with the reduced turnover.

Despite a voluntary redundancy process that cut two jobs and a review of other overheads like insurance, the directors recognised that these measures alone would not be enough to save the company from a financial crisis.

The Solution

The directors approached RMT KSA in late 2013. After a review of the company’s financial situation, the recommendation to propose a Company Voluntary Arrangement (CVA) was given. This would allow the company to restructure its debts and continue trading. The CVA proposal offered creditors a return of 57p for every £1 owed, a significantly better outcome than the zero return they would receive in a terminal insolvency.

The Results

The CVA was accepted by creditors in early 2014. With the company’s debts now manageable, the directors were able to focus on the future and put their initial expansion plan into fruition. The company has since secured new customers through word-of-mouth referrals from existing satisfied clients.