What should businesses do if they have a hole in their cash flow?

11/05/2022.
The next time you can’t sleep, are worried about cash flow or your bank is asking you to speak to an adviser, consider this as a positive, a way to understand your options, and a potential solution to your current predicament.

Business owners continue to face increased pressure to maintain their business, do the right thing for their stakeholders and protect their interests. As government measures come to an end, company directors with cash flow concerns are faced with decisions on how best to take their business forward, such as; continue to utilise the availability of short-term cash, carry on along the same path (on the basis that they have credible financial forecasting models in support) or consider a restructure of the business. Just because funding is available in the market, doesn’t mean that it is the right thing to do.

If it is plugging a hole in cash flow with a clear sight on recovery as a result, then maybe, but what if it is simply increasing your debt burden and likely personal liability given the requirements for personal guarantees. What if it is simply buying time in the hope that something might change, maybe there is a better solution. This is where a restructuring firm might be able to help.

Let us be clear, if a formal process is required, then an insolvency practitioner is required to act for the benefit of the creditors but that might include you, and if not, might mean that taking early advice could reduce your personal exposure, give you a clearly defined well thought out plan, and ultimately the opportunity to continue to trade, albeit potentially in a different vehicle.

Restructuring firms can give you options, show you what choices you may have, outline your fiduciary obligations as a company director, and be a support, a help, a guide in often difficult stressful situations. Talk to an insolvency professional and you will hear the words help, support, assistance and how early involvement can have a significant benefit to a company and its stakeholders, not least the owner’s sanity and quality of sleep.

So, consider this, the next time you can’t sleep, are worried about cash flow or your bank is asking you to speak to an adviser, consider this as a positive, a way to understand your options, and a potential solution to your current predicament. Perhaps you don’t see the need, think everything will be fine, know that the future looks good, then as long as you back this up with strong financial sensitised forecasts and quality financial information, then the chances are your bank or primary funder will agree.

If not then an adviser can help to communicate this in a format a bank will want to see. Therefore, where is the harm in having a meeting, most restructuring firms will give you some free time before a formal engagement. Therefore, look at the involvement of a restructuring firm as a positive step in support of your assertions, or a third-party opinion on what could and should be your next step forward.