financial disaster

By Keith Tully

Companies of all sizes and in any industry sector can find themselves facing up to serious debt problems and the prospect of real financial distress. Such a situation will always be testing for the directors involved but avoiding key issues can make matters considerably worse when it comes to dealing with bankruptcy, administration or receivership. Directors therefore need to take positive steps if ever their company becomes insolvent and is unable to deal with its debts.

Here are some tips on how to do so effectively:

1. Be proactive

Underlying any effort to save a company from financial disaster and from going out of business should be a sense of determination to make the best of what might be a bad situation. Taking steps to tackle the key issues at hand is essential if any positives are to be salvaged.

Too many company directors refuse to see the writing on the wall and they fail to take action to rescue their business even long after its debt problems have become completely unmanageable. By being proactive, directors can assess options and potential routes forward while there are still choices to be made and advantages to be gained.

2. Bring key stakeholders together

A lack of effective communication among high level management teams can easily bring down a company as it heads towards insolvency, administration or receivership. For directors, the priority should be bringing all the relevant stakeholders together to thrash out a plan of action that has the company’s best interests in mind, even if none of the options are immediately appealing.

Without agreements between the parties that matter most and a sense of people pulling in the same direction, the strain of dealing with a tough financial position can quickly become unbearable and nothing short of disastrous.

3. Liquidate non-essential assets

It may be with a heavy heart but for directors at the helm of a failing company there might be little choice but to see all and any non-essential assets liquidated to raise funds. Cash injections of any scale can help stave off the prospect of insolvency and administration and it can buy a business time to find an appropriate route forward during tough moments.

Insolvency practitioners appointed to control your company once you’ve entered into administration will inevitably be looking to identify non-essential assets to liquidate in the interest of seeing your creditors paid back all or part of what they’re owed. By selling your own assets on the open market before that point is reached, it’s possible to open up some measure of financial flexibility while it can still make a positive difference.

4. End relationships that are not absolutely necessary

If your company is approaching the point of no return as far as being declared insolvent is concerned, there is no room or reason for maintaining relationships with suppliers or employees whose services are not absolutely essential to your operations. It is a harsh reality but even long-standing employees might have to be let go and supplier relationships that have worked well might need to be ended.

5. Assess your finance options

So much of what rescuing a company from the brink of financial disaster involves is buying time and raising funds to pay creditors in any way possible. This though is not entirely an internal-looking process and company directors are well advised to seek out the funding options that now exist to help struggling businesses survive and raise cash when it is most needed.

Even with a poor company credit rating, there are ways for organisations to find ways and means of generate a cash injection. Generally, the process will involve the leveraging of assets to access loans and lines of credit but these assets can include invoices, as well as more tangible assets such as machinery or fleets of vehicles.

Whatever your circumstances are, if you are concerned about the prospect of seeing your company go out of business or be forced into administration, then it is vitally important to seek out advice from specialists and experts in the field.

Real Business Rescue‘s Keith Tully has amassed more than a decade of experience in assisting the owners and managers of struggling businesses.  He has helped small business owners become better directors so that they can avoid the unnecessary hardships of overburdening debt and insolvency. @RealBizRescue.