Small businesses facing uncertainty – five tips on how to save your small business
August 10th, 2016
With the vote to leave the EU adding further uncertainty to an already challenging economic climate, many small businesses may be in for a tough time over the next few years. Paul Davies, a business turnaround specialist at accountants Menzies, offers advice for businesses that find themselves in trouble.
You might not want to admit to suppliers that your business is in difficulties for fear that they may stop doing business with you, plunging you into deeper trouble. But your creditors may surprise you, as they will often have experience of dealing with customers in financial distress. So, if you cannot pay them on the due date, tell them so and also spell out what you intend to do to ensure that they will get paid. They are likely to have been in this situation before and will want to work with you – it’s not in their interest to push your business into insolvency.
Stick to your promises
If you find that you have to talk to your creditors to extend payment terms, stick to the promises you make to them. This will build trust with them, meaning that if you ever have to have a similar conversation again in the future, they will know that they can rely on you to deliver what you’ve promised.
Cash is king
Can you manage your working cash flow cycle? A very profitable business will still fail if it runs out of cash because money is flowing out faster than it is coming in. But, a number of alternative financing options exist outside of the high street banks – including factoring [where a business owner sells accounts receivable at a discount to a third-party to improve cashflow], external credit control, invoice discounting and trade finance. These enable small businesses to access fast and easy funding to avert a cash crunch.
Management information is key
Did your management accounts predict this problem? If not, why not? Good management information can ensure you are forewarned that your company is about to hit a rough patch and can offer you the time that is essential to turn the business around. There is no reason not to know what is going on within your business as there are plenty of bookkeeping and outsourced accounting options available for every budget.
Take action – doing nothing is not an option
If you take action as soon you are concerned that your business may run in to trouble by getting expert advice then it is likely that you can avert disaster – and may even add value to your business. But time is of the essence. Speak to a turnaround or restructuring professional: they will not generally charge for initial advice and can offer your business specialist assistance. They have experience of many similar situations and may be able to provide a solution that you have not thought of.
Contact Paul at 020 7465 1972