Just last week heard from a client whose business had serious cashflow difficulties largely because of a cancelled Government contract.
The owner – a talented designer – was at his wits end because of unrelenting pressure from a very unhelpful banker and HMRC. The bank wanted to revalue the security – factory buildings – at a cost of £1500 and were also insisting on a review by a major firm of consultants at a cost of £7500, all costs to be borne by the business.
Feeling backed into a corner the owner buckled under pressure and on the advice of his accountant appointed a firm of Insolvency Practitioners to arrange a Company Voluntary Arrangement – a CVA – at an initial cost of £5000.
A CVA can be a worthwhile strategy to enable a business to trade through a difficult period and does provide some immediate protection from creditors but regrettably it’s an inflexible tool and a more informal process can often achieve the same result if action is taken early enough.
The key when faced with mounting cashflow issues is to act decisively well before matters get out of control and often the best way to progress matters is to appoint an independent firm to review and manage the finances in the short term – enabling the business owner to concentrate on running the business.
Article by Andrew Hawkins