A healthy business with a debt problem – is there a way out? (Part 1)

13th of October, 2010 Bookmark and Share
What do you do when you run a robust, healthy business with a strong sales pipeline and a highly competent management team, but for reasons beyond your control you have a serious debt problem? Is there a way out of a cashflow crisis or does it spell the end of the road?

As the UK moves slowly and tentatively out of recession, albeit under the cloud of a threatened double-dip, there is no shortage of businesses that are experiencing cashflow problems. For some, a cash crisis is down to poor financial controls or an unsustainable business model, but this can hit an otherwise healthy business through no fault of its management.

In PART 1 of our two part series, Nick O’Reilly looks at the signs that your business is in trouble and discusses what you should do immediately, once these signs have been identified:

There are a host of causes that can strike at the heart of a company’s cashflow; a key customer going into administration, the loss of a primary supplier, the departure of a key member of staff or a company disaster such as a fire. All of these events are beyond the control of management, but will undoubtedly impact, often critically, on cashflow.

If your business falls victim to one of these events, there are a number of steps that should be taken immediately.

1. Consult your accountant: The worst thing any owner-manager can do at the first sign of trouble is to look the other way. The problem will not go away, it will only get worse and, the longer it is left, the fewer options will be open to the business when management finally does face the music.
2. Get a tight control on cash management: If this is an area that has traditionally received little attention, make sure it becomes a key priority. Analyse the debtors, particularly late payers, and agree a plan of action with the finance team or credit controller to recoup outstanding debts as quickly as possible.
3. Communicate regularly and clearly: Make sure internal lines of communication are clearly understood and regular reporting is maintained. If management fails to communicate with staff, then a version of the truth, usually inaccurate, will become the reality. This type of alarmist gossip will distract and demotivate staff and at worst, will result in concerned team members hunting for a job elsewhere.

In the second part of this series, published next week, Nick O’Reilly discusses the number of options management can consider, if the company is unable to steady itself financially by speeding up collection of other outstanding debts.

For more information about any of the topics discussed in this article, or to speak with Nick O’Reilly direct, please contact Georgina Swain at nationalpressoffice@frpadvisory.com or visit website at www.frpadvisory.com

Press contacts for FRP Advisory:

Georgina Swain
FRP Advisory Press Office
Tel: +44(0) 20 3301 7350
Mobile: +44 (0) 7881 523 345
Email: nationalpressoffice@frpadvisory.com

About FRP Advisory
FRP Advisory LLP is focused on creating, preserving and recovering value for its clients.
The firm offers a comprehensive suite of services to the mid-market and financial community. These focus on enhancing the performance of businesses, as well as saving businesses in distress.
Services include: commercial & asset finance, corporate insolvency, restructuring, independent business reviews, interim management & placement services, personal insolvency & advisory, creditor services, insolvency investigation services and banking live-side support.
With 28 partners and 200 staff, FRP Advisory is one of the largest restructuring, recovery and insolvency firms in the UK, operating out of 9 regions including: East Midlands, Eastern Region, Kent, London, North East, North West, St Albans, Sussex and West Midlands.
To find out more, visit www.frpadvisory.com

Keywords: Nick O'Reilly, restructuring, recovery, insolvency, asset finance, commercial finance, transition, FRP Advisory, FRP Capital, FRP Transition, georgina swain, annie wilson, FRP

Georgina Swain
Nick O'Reilly - www.frpadvisory.com