continuing with my blogs on businesses I am introduced to,its amazing to see how many business directors/owners ‘bury their heads in the sand’ and hope that issues that come along will go away without addressing them.
Recently, a company who have has had a disastrous couple of years financially, not reviewed the accounts or business with their ‘accountant’ has ended up with HMRC and creditors with threats of winding up and closing down a potential turnaround business.
I was asked to review what had happened and suggest a plan of attack to take the business forward again. As the owners property was tied into the company a liquidation was out of the question and a CVA (company voluntary arrangement) was suggested as the owner/director (as I find with a lot of companies) did not want to feel a failure in business.
To reassure directors that a turnaround can be achieved is a difficult task as they only see what current situation is and not the potential that can be achieved. The company had been supplying public sector contracts with a very small profit margin (and in fact a few loss making) with the perception that the cash flow from public sector contracts was assured and could lead to larger contracts. The reality of this is it does not matter how big the contract is, if it does not make you a decent profit or in fact loses you money then it is insane to continue to supply.
I have suggested and has been accepted that with a formal CVA and the business aiming for more private, higher profitable work with the lower profit public sector contracts then the company could achieve a successful turnaround. This in turn keeps the company reputation with creditors and the bank intact and will give them confidence in supporting the company when growth plans are in place.
Anyway, I digress from the point of this blog, and that is please do not bury your head in the sand and face the problems and issues head on, this will relieve stress and give confidence to creditors in supporting your business.
Communication is vital in situations. If you are not comfortable in approaching creditors in fear of what they might say then please get a professional in, they know how to handle situations and can let you as a business owner get on with growing the business.