In the current economic climate, many businesses are facing financial difficulties. In addition to the lasting effects of COVID, businesses in practically all sectors are facing a range of challenges related to the impact of Brexit, the Ukrainian war, rising energy prices, inflation, the cost-of-living crisis and supply chain disruptions.
In addition to these problems, business owners are also faced with the challenges of changing consumer behaviour, both as a result of lower consumer confidence due to the issues stated above, but also growing interests in sustainability and environmentally friendly practices. Due to these hurdles, the need for flexibility and the ability to bounce back has never been higher.
Whether you are a small start-up, or a well-established business, read on for our essential tips to overcome financial struggles and move towards a brighter future for your organisation.
Navigating Financial Difficulties
In order to navigate financial distress, it is essential to act quickly and understand the options available. To help you make the right choices for your business, it is always important to seek professional advice from a licensed insolvency practitioner at the earliest opportunity. Insolvency practitioners are experienced in helping businesses in all sectors to restructure and make the correct business divisions in the face of financial challenges.
If your business is experiencing financial problems or facing insolvency, here are some important strategies to consider.
Ensure your financial information is current and complete
Keeping abreast of your financial information, including cash flow, is vital for understanding the issues facing your business, as well as evaluating the potential solutions and next steps to take. A licensed insolvency practitioner can provide assistance in ensuring your financial information is in order.
Always have a strategy in place (as well as a contingency plan)
It’s important to clearly understand the challenges the business is dealing with in order to address them in the proper order. For example, are there areas of the business that are not doing as well as others? Are there certain contracts that are not as lucrative as expected that it would be wise to get out of? Understanding these key issues is important for identifying the best solutions and putting a plan in place. However, it’s important to consider that having a thorough strategy will also mean having a back-up plan for all possible eventualities.
Concentrate on cash flow
In times of financial difficulty, it’s important to continue to concentrate on cash flow. In order to recover from financial issues, any options for improving cash flow are highly worthwhile. Measures to consider include:
- Cutting back on unnecessary expenses
- Delaying capital expenditure
- Streamlining invoicing processes
- Investigating ways to reduce credit terms and payment plans offered to customers
- Offering customers incentives to pay early to prioritise cash coming into the business
- Negotiating extended payment terms with creditors and suppliers
- Taking a proactive approach to overdue payments from customers
Consider sources of funding
It’s important to consider possible sources of funding to recover from financial challenges. In addition to loans and refinancing, an important first step could be to seek investments from shareholders. When it comes to seeking funding for your business, it’s vital to have a clear understanding of your funding requirements, as well as ensuring that your financial data is up to date.
Pay attention to your directors’ duties and obligations
The usual obligations of directors of a corporation remain in place when financial issues arise, however, if a business is insolvent, facing insolvency or likely to enter liquidation or administration, directors must always consider the best interests of the business’s creditors, or they may be personally liable if in breach of the Insolvency Act 1986, Companies Act 2006, Company Directors Disqualification Act 1986, or Finance Act 2020. Consulting with an insolvency practitioner can help you to avoid breaking your directors’ duties, reducing the risk of misfeasance or wrongful trading.
Take care of your mental health
The emotional load of managing a business in financial trouble can take its toll on an individual’s mental health and wellbeing. In order to make informed decisions for your business, it’s important for you to be mindful of your mental wellbeing.
Seek out advice from Licensed Insolvency Practitioners
The more quickly action is taken to confront financial obstacles, the more potential solutions exist, and therefore, the greater the likelihood of turning around these financial problems. Whilst it can feel difficult to reach out for help, postponing difficult choices only serves to make them more complicated and the probability of a successful business recovery is much decreased.
In order to make the right decisions for restructuring or turning your business around, it’s important to ensure you speak to experts to ensure that you make the correct financial and legal choices. BEACON LIP are licensed insolvency practitioners, specialising in delivering tailored solutions to businesses and individuals facing financial hardship.