When you have insufficient cash flow, business is struggling, and the costs are rising, it can seem like everything is falling apart around you. However, with a bit of resolve, determination, and research it may be possible turn things around at the last moment. The following 6 steps may be the start of turning your business round.
Step 1 – Assess and analyse the situation
This initial step would involve having a meeting with the managers and directors of your company, or your accountant, and analysing where exactly the business is spending its money, how much debt it has, and why it is failing.
Step 2 – Research business restructuring techniques
Invest time on researching debt management, planning, and consolidation. Utilise any software or methodologies you have access to, and start to devise a solid plan that is backed by logic and mathematics.
Step 3 – Liquidate any unessential assets
If you have any equipment, inventory, tools, company vehicles, real estate, or any other property or assets that are not essential to the continuity of your company, you can look to sell them either in an auction or in the open market. The funds raised through a partial liquidation of company assets can be used to minimise debt and/or invest in promising opportunities.
Step 4 – Review unnecessary employee or supplier contracts/relationships
If you operate effectively without the product or service the supplier/employee is providing then you could potentially save the money and put it towards debt repayments or investments.
Step 5 – Consider financing options
Even if you have poor credit you may be able to use assets as leverage to obtain a secured loan. If your clients have a reputable history of paying on time but you can't afford to wait until they pay, you could apply for invoice discounting or factoring, which would allow you to convert your current sales ledger into a cash advance.
Step 6 – Examine Formal Insolvency Procedures
If you are unable to achieve success with independent negotiations and the aforementioned techniques, then you may want to resort to initiating a formal insolvency procedure, such as administration or a CVA. An administration is a process that prevents creditors from being able to take legal actions against your company while an IP acts as administrator to facilitate the rescue of the business, sometimes through a sale as a going concern (known as a “pre pack”). A CVA is a binding contract that would give you new repayment terms with lower monthly payments and potentially allow you to eliminate or revise employee/supplier contracts.