Point of Sale Company Expanded into USA Which Caused Problems

The Challenge

A global leader in EPOS and online ordering, with customers ranging from independent businesses to global chains, faced a critical financial situation. The company’s issues began with a strategic decision to expand into North America, funded by the UK company. A significant contract with a major customer, expected to be a multi-million-pound sale, was put on hold, immediately costing the company an anticipated £200,000 in revenue in 2013. This was compounded by a substantial R&D investment of around £250,000 to upgrade software for international markets, which in turn caused a loss of sales in the UK market due to project delays. Cash flow became extremely tight, and the company fell into arrears with its creditors. An outsourced accountant’s errors made the situation appear worse than it was, reporting a profitable year as a loss-making one. Despite progress in North America and a rebound in UK sales, investor interest waned, and the company’s informal time-to-pay arrangements with creditors were rejected.

The Solution

In response to the mounting pressure, the directors made the decisive choice to appoint KSA to assist with a Company Voluntary Arrangement (CVA). The CVA served as a formal, legal framework to restructure the company’s debts. The directors had already tried to address the issues by revitalizing UK sales and securing a number of sales leads in North America, which were starting to show positive results. They had also put together proposals for informal time-to-pay arrangements with creditors. However, when these were not universally accepted, the CVA provided the necessary mechanism to ensure a unified approach. The CVA proposal offered a repayment of 38 pence for every £1 owed to unsecured creditors over a five-year period. This was a clear and structured offer designed to maximize creditor returns and provide the company with the breathing space it needed to recover.

The Results

The CVA was a complete success, being officially approved in December 2013. The approval of the CVA was a turning point for the company, as it provided a legal shield against further creditor action and allowed the company to regain control of its finances. The company was able to leverage the positive progress it had already made in North America and the UK, with sales inquiries and new customers showing a strong recovery. With the CVA in place, the company could focus on its core business activities, including completing software upgrades and fulfilling the contracts it had secured. The successful CVA proved to be the vital step that enabled the company to stabilize, continue trading, and pursue its ambitious growth plans. The CVA protected the company and its valuable assets from liquidation, giving it a clear path to future profitability.