As we draw towards the close of 2022, many of us are beginning to feel the pinch in our finances in our personal lives and the business world. With ever-increasing costs of living, energy prices reaching unprecedented highs and mortgages now being the latest cost to take a hit, it’s no wonder people are beginning to find themselves in difficult positions, wondering how they will make it through the winter.

For business owners, these situations can be even more devastating as you are facing the onset of increasing costs from all sides, whether with your employees needing higher pay, your supply chain demanding higher prices, or the overall cover of overheads. All these factors eventually begin to add up, and if you aren’t turning over enough revenue to cover your business costs, you may be worried about your business’s future.

If you’re already there, is there a way out, and is there hope for the future?

If your business is struggling financially, what options do you have?

It is important to remember that running a business comes with risks, and many external factors, like those discussed above, can impact your business’s success. At Fortis Business Rescue, we want to reassure you that you are not alone!

Why might my business fail?

There usually is never one exact reason why a business may fail; it’s usually a culmination of events that finally stack up and result in the company no longer being able to operate. By being aware of some of the common reasons businesses fail, you can best prepare yourself and be sure to manage any internal risks. Sometimes, the failure may be entirely out of your control – look to the COVID-19 pandemic and economic crashes for the worst cases of businesses that have often been trading for years having to shut up shop.

Business failure reasons to be cautious of include:

·   Bad marketing

·   Ineffective products

·   Theft and fraud

·   Poor management

·   Unexpected increases in the cost

·   Unsustainable growth

What action should I take if my business is struggling financially?

The first sign that your business may be operating on a knife edge may come from your creditors. If you have found yourself in a position where creditors are chasing you for late invoice payments, you owe money to HMRC, or you are even in receipt of CCJs, it’s time to think about what action you need to take.

And no, ignoring your debts is never the correct answer. Instead, it would help if you looked to negotiate with your creditors to buy yourself more time.

Help available includes:

·   Time To Pay Arrangements – this is an agreement with HMRC that will allow you to pay your unpaid tax bills over an extended period, usually of no more than 12 months.

·   Seek Financing Options – invoice bridging has become a popular way to get advances on invoices you are waiting to pay; this can help alleviate the pressure from creditors for a short time.

·   Company Voluntary Arrangements – are formal payment plan arrangements that can last between 3 and 5 years, and creditors must comply with the agreement.

·   Administration – where external administrators take over the operations of your business to assess future viability and strategies to move forward; during this period, the company is safe from any action against creditors until an arrangement has been agreed upon.

·   Creditors Voluntary Liquidation – this is an option to exercise if you feel your company can trade forward no longer. There are options with this process that allow you to buy back the company assets and trade forward in a new entity offering the business a clean start. 

What other steps can I take to help my failing business?

While creditor pressure can mean make or break for your business, there are steps you can take to avoid getting to this stage. Mostly, it is about being observant, strategising and then acting as soon as you identify potential risks in your business.

1.  Identify

In what area has business begun to decline? What is the possible root cause? Are there any issues with management, employees, or processes?

Once you identify the root cause of where the business is failing, which may be in multiple areas, you can begin to implement a plan to combat the effects of these issues before it is too late.

2.  Understand

Understanding your customer needs and market – especially how they evolve- is essential. Just because something worked one year doesn’t necessarily mean it will work the next. Many business owners fall into the trap of doing what they always have and expecting the same success; the past few years have taught us that we all need to be adaptable and that business interests can change overnight. Keep market research on your agenda and watch how competitors work to stay ahead of the game.

3.  Manage

Cash flow management in business is, without a doubt, one of the most vital pieces of work you need to do to keep your company afloat. Ensure you have an experienced finance controller managing this; if you can’t afford a full-time person, look to involve a consultant or accountant. You should assess your cash flow every week and always look well ahead of your business plans to ensure you have sufficient funds to execute them and cover overheads.

4.  Reduce

This is one of the least favourite parts of a business but a necessity. If your business cannot support a full staff force anymore, you need to look to whom you can let go of while still managing to operate functionally. This also covers other business overheads, including company cars, office spaces, services, and subscriptions. If your business is struggling, you must assess precisely what you need and reduce what you don’t.

The Outlook

Just because your business may be struggling financially now doesn’t mean it’s all doom and gloom. It is possible to save a company from a financial crisis so long as the action is taken soon enough.

Speaking with a professional business finance advisor is always the best action if you feel stressed and unconfident about your company’s prospects. Our experts at Fortis Business Rescue are here to relieve those stresses and lead you forward in a direction that will best serve you and your business.

Get in touch with one of the team today on 0161 850 0624.