There are many reasons why your business might be facing difficulties. The number one reason for the end of companies in the UK is poor cash flow and inept financial planning. Here are a few tips on how to help your company if it’s in trouble.

While business owners don’t always want to plan for their company’s demise, it is a good idea to know what to do if you find yourself facing difficulties.

Early 2023 especially saw over 105,000 businesses close, with small and micro enterprises being hit the hardest as these are the most vulnerable and make up a high portion of UK businesses.

This guide looks at some tips for getting things under control and assessing whether or not, as a business, you can recover and what to do if you need to start the process of winding down and dissolving the company.

Face your Issues

Burying your head in the sand won’t get you anywhere except into further trouble. Sit and take stock of all of your primary issues and look at how you can get back on track with them. It won’t be easy, but you need to recognize where things are going wrong so you can address them and put changes or corrections in place.

It can be a good idea to get someone to help you with this process. Getting another perspective from someone who isn’t too close to the company or who is specially trained to handle matters of this sort.

Operational Changes

First, look at how you can make changes to improve your business. Think of it as a prescription to get better, as if it were an ill human. What is making things worse, what do you need to eliminate, and what medication do you need to get back to total health?

Head back to your business plan and look at what is and isn’t working and how you adjust your operations. Go through your contracts and processes and see where things are being overlooked and what changes you can make.

Whether you restructure, look at redundancies, renegotiate contracts, or bring in help to help you turn your luck around, you need to get on board with making changes ASAP for any chance of success.

Reassess Your Finances

You need to take a step back and assess your finances. Where can you streamline, what is essential, and what can you trim from the budget? You need to know precisely where all of your money is going and where it is coming in from. From here, you see exactly what you owe to offer payment plans to creditors, what you can afford to repay after essential expenses, and where you are losing money. This can help you put plans in place to avoid further actions and give yourself a chance to get back on track.

Pay Your Tax Bill

It doesn’t matter what facial pressure you are under or the difficulties you are facing; make paying your taxes a priority. You need to talk to HMRC if you are experiencing difficulties in paying your tax bill as they might be able to set you up with a payment arrangement, Time To Pay (TTP), giving you 12 months or paying off what you owe. However, this option requires you to prove your company is still viable and you can afford to pay back what you owe.

Consider A CVA

A CVA is a Company Voluntary Arrangement, and this means that you will enter a legally binding contract that allows you to pay off your debts and still keep the business running. In cases where you cannot expect to pay off all of your debts, you come to an agreement with your creditors to keep operating and play your part in clearing the debts. You need 75% of your creditors to agree to this approach, which can save you from insolvency. If you are a sole proprietor, you might be able to qualify for an IVA (Individual Voluntary Arrangement) instead.

You should be aware that even if you enter into liquidation, company directors can still be liable for legal problems brought about by liquidators. If you find yourself facing misfeasance claims suggesting that you did not act within your power and responsibility as a company director to do what is best and you were in breach of these regulations, then getting advice and support from professionals in this area, such as https://www.ndandp.co.uk/insolvency-claims/misfeasance-claims/ will help you with your next steps forward.

Administration

The last thing anyone wants is to call in administration, but if there is no hope of saving your company, this might be your only course of action.

What this means is that you will essentially be transferring the management of the business into the hands of the administration company. From here, they will make the decisions regarding what happens next. These decisions will be made with the best interests of the creditors in mind.

Entering insolvency means that the company can buy some time and is protected from benign shutdown or prosecution. The aim of administration is to find the best course of action for the company, be it getting things back on track with some restructuring, finding new buyers, or winding down the company in the best way. However, you should bear in mind that this could also lead to insolvency too.

Pre Packaged Administration

Pre-packaged administration is when you still have viable parts of the company that could be sold off in an otherwise insolvent business. While the company as a whole might not be salvageable, some parts of it can be packaged for prospective buyers to help you avoid burning in an insolvency practitioner. It can often be a cheaper and faster experience than entering administration or insolvency, as these can take time and be expensive to enter into. The last thing anyone wants when they start a business is to think of it failing and ending up in difficulties down the line, be it after 6 months, 12 months, or even 10 years. But knowing what your options are before you get to the point of no return can help you avoid this situation as much as possible.

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