Haulage and Logistics Company Faced Cash Crunch

​​The Challenge

A fast-growing, multi-depot company with sales of around £30 million faced a critical cash flow crisis in late 2009. The core problem was a lack of reliable financial data, stemming from outdated DOS-based systems and poor management information (MI). The directors, despite their experience, were unable to accurately forecast the impact of a series of unfortunate events on the company’s solvency. These included a major bank, RBS, restricting drawdowns on its invoice finance facility, a four-month tax arrears deal with HMRC, and a number of unexpected external factors. In 2011, severe snow brought operations to a standstill, followed by rising fuel prices that the company’s slow systems couldn’t recover quickly enough. A major customer moved its accounts payable to India, causing delayed and incorrect payments. These factors, combined with several bad debts, created a relentless cash flow squeeze that led to a new, unmanageable tax debt. With HMRC unwilling to agree to another time-to-pay deal, the company was in a dire situation.

The Solution

Recognizing the fundamental problem was poor financial data, the company’s board, advised by KSA Group, made a significant investment in a financial overhaul. They hired a new, experienced finance director to replace the old systems with modern, Windows-based ones. This allowed them to analyze vast amounts of transactional data, providing a clear picture of the business’s profitability on a per-depot basis. Two depots were closed as a result of this analysis, and a project was launched to analyze every aspect of customer and operational efficiency. The company also successfully replaced its RBS facilities with Close Invoice Finance, renegotiating better terms. When a new tax debt accumulated and HMRC refused a time-to-pay deal, the company chose to pursue a Company Voluntary Arrangement (CVA) as the only viable option to save the business and repay its creditors.

The Results

Despite an independent business review (IBR) firm advising the bank that a CVA would not be achieved, the company proved them wrong. The CVA was approved with over a 99% vote in favor, including HMRC, which held over £1.5 million in tax liabilities. The CVA provided for initial monthly payments of £9,000 and a proposed dividend of 38p in the £1 over five years. This outcome demonstrated that even a business with poor financial data can be rescued. The company’s investment in its internal systems was a key factor in the turnaround, as it allowed the directors to make informed decisions that led to cost-cutting and improved profitability. The case study is a powerful reminder that while external factors can create a crisis, a company’s ability to understand and control its internal data is paramount to its survival. The CVA provided a critical safety net that allowed the company to implement its turnaround plan and return to a position of financial health.