Dealing with financial distress is often very challenging. The impact can be minimised if early planning and advice is sought.

Simon Underwood, Business Recovery Partner at Menzies LLP (www.menzies.co.uk), shares ten essential tips, should you find your business in difficulty.

1. IDENTIFY THE SIGNS OF FINANCIAL DIFFICULTY
When a company is in financial trouble, it usually faces a drop in revenue as well as issues paying creditors, which may be more prominent in some cases than others. In particular, reduced footfall continues to have a direct impact on earnings in hospitality & leisure, and there is often a lag effect in other sectors where there is a backlog of orders to fulfil.

2. SEEK PROFESSIONAL ADVICE AND TAKE ACTION IMMEDIATELY
If a company is in financial hardship, it is critical to act swiftly by focusing on cash management and taking actions to improve operational resilience. The sooner a company consults an insolvency practitioner, the better its chances of surviving.

3. RELIEVE CASHFLOW PRESSURE AND SAVE MONEY
Cost-cutting measures can aid in the alleviation of cash-flow problems. A company may be forced to make difficult payroll decisions as well as identify ways to cut discretionary spending. A critical examination of fixed costs, such as property expenditures, should also be carried out.

4. PRIORITISE CREDIT MANAGEMENT

If the company is having cash flow problems, it’s a good idea to call in any outstanding debts and keep a careful eye on credit limits. Outsourced support to strengthen the cash position and increase operational efficiency in this area may also be beneficial to a business.

5. SEEK SUPPORT AND KEEP INFORMED

It is critical for businesses to stay informed about numerous support programmes in order to stay afloat during this challenging time.

6. CONSIDER OTHER OPTIONS FOR IMPROVING THE BUSINESS’ CASH POSITION.

Businesses must discover new strategies to improve their cash position as a result of the pandemic, such as selling surplus assets. Forecasting their cashflow can assist the company in weighing the benefits and drawbacks of taking such action.

7. EVALUATE BUSINESS AND SUPPLIER CONTRACTS ARE EVALUATED
If a company reviews its contracts quickly, it may be able to put itself in a stronger position. Furthermore, it may be able to renegotiate terms and conditions to the benefit of the company.

8. MONITOR BUSINESS MANAGEMENT DATA
When managing a business amid a crisis, it’s critical to be aware and keep the financial status of the company under constant scrutiny. A further drop in turnover, for example, could necessitate more resource modifications.

9. GET IN TOUCH WITH LENDERS
Maintaining a two-way communication with lenders is critical since it reduces the danger of them withdrawing assistance. If you’re about to give bad news, talk to an insolvency practitioner first so they can help you craft your message and anticipate the lender’s reaction.

10. COMMUNICATE WITH CUSTOMERS AND SUPPLIERS
Open lines of communication between customers and suppliers can aid in the preservation of relationships and the reduction of the risk of supply chain interruption.

For further information on Menzies business recovery services, or to discuss your specific circumstances with one of our team, contact advice@menzies.co.uk.