Get your business back in the black
Last Modified 16th of February 2021
We are all aware of that sinking feeling that is felt when debt begins to rise, leaving many with repayments that they simply cannot afford. But for businesses this feeling can be heightened due to the collective impact it will have on all those involved with a company. CEO’s and directors are responsible for all staff and trade, meaning that other businesses and employees can suffer from the misfortunes of another; causing a domino effect.
While the temptation will be there for directors to use as much of their cash as possible to clear this debt, leaving a business with nothing is even more undesirable. Attempts at paying off debt that a company cannot afford can cause more damage than good and it is important for these businesses to be aware of the other options that are available to them. Here are a few ways to get your business back in the black:
Debt management plans for businesses
Company voluntary arrangements (CVAs) and pre pack administration plans are both realistic and achievable choices that the majority of struggling businesses can apply for. A CVA is a legally binding contract that sees companies able to lower their monthly payments, providing creditors agree with to the proposed terms and amounts. This type of ‘deal’ with creditors is regularly sought by debtors who wish to continue trading.
Pre pack administration is a process whereby a new business trades in the place of the failed one which is subsequently liquidated. This type of procedure, commonly known as phoenixing, does not sit well with creditors who are not consulted for their permission in this circumstance.
Cost cutting procedures
Certain cost cutting procedures should be implemented into a company before redundancies and reduced working hours are discussed. Directors and CEOs have a responsibility to keep staff happy and motivated, thus increasing productivity, and so these staff cutting options should be the last resort when considering ways to get back into the black.
Accounting records should be kept up to date and free from inaccuracies in order for directors and managers to be fully aware of a business’s current financial status. By ensuring that any actions or payments are dealt with promptly and correctly will lead to better management of finances.
Taking a close look at current supplier costs can also save valuable money. Shopping around to find better deals from suppliers, landlords and electricity providers can be a simple yet effective way of cutting costs around a company.
Seeking professional help
It is always advisable to seek insolvency advice from financial advisors before deciding how to tackle corporate debt. And it is important to remember that the last thing creditors want to see is a failed business so debt management plans are ideal in this circumstance.
This is a guest post by Nicola Winters on behalf of Cooper Matthews, a financial consultancy firm who offer advice on company voluntary arrangements, pre pack administration and debt management plans.