Businesses in the UK are battling the onset of the Omicron coronavirus variant which threatens recovery across the UK, due to the re-introduction of restrictions, and may be a cross too much to bear for many. Insolvency has been knocking on the door throughout the past couple of years but closing the business doesn’t always have to be the only option.
Working with a reliable insolvency company, it is possible to overcome financial loss in business through the use of careful planning, restructuring and rescue packages. But first, you need to understand what financial loss is and how it has occurred.
Financial loss and the reasons why it happens
Financial loss in business is quite simply a matter of more money going out than coming and therefore, the business is not able to afford its debts. There can be any number of reasons why a financial loss has occurred; indeed, it is often not one specific reason but a combination of several circumstances. The most common reasons why a financial loss happens are:
● Expanding a business too quickly.
● Not being able to afford expansion.
● The loss of a particular product line.
● A change in consumer trends.
● A change in the market.
● Competition from other companies resulting in a loss of trade.
● Financial mismanagement.
How to overcome financial loss in business
It is hard to address your financial loss until you understand how and why it has happened. Sometimes it isn’t easy to recognise where the issues are and hiring a reliable insolvency company will help identify the cause and work out how to overcome financial loss in business.
● Identifying the cause of financial loss – before you are able to consider any plans to overcome financial loss, you first need to identify where the loss has occurred and how it has happened, i.e. the cause. Has there been a change in market conditions or in consumer trends? Have you expanded the business recently into a new product line, new office space or hired new employees? Has launching a new product or office resulted in a budget overspend? Also look at your accounting practises and see if there has been any mismanagement in budgets or funding. You may find that the cause of any financial loss is not directly attributed to your own company activities. The losses could be a result of external issues, such as supply chain problems or distribution. These issues can be harder to solve, but not impossible.
● Assess your incomings and outgoings – your financial loss issues could be due to buying too much stock, paying too much for supplies or distribution, an increase in raw material costs or amenities, loan repayments could be excessive or customers are being slow in paying their invoices. Assess your incomings and outgoings to identify where the company is over-spending. Renegotiate loan repayment terms, change to more cost-effective suppliers and raw material providers, sell off any stock that is not required, chase customers for outstanding payments and stop offering credit terms to customers that are not paying within 30 days. This will immediately improve the business’s cash flow.
● Restructure the business – this doesn’t necessarily mean making sweeping changes but it does mean that there needs to be a change in the structure and management of the business. A reliable insolvency company will be able to consider your current structure with an unbiased view and identify company weaknesses, such as streamlining the ordering process of stock or raw materials or a change in staffing. This will help to improve the way the company is run to overcome financial loss and put the company back on a successful path.
Moving forward from financial loss
Once the reasons for the financial loss have been identified, your incomings and outgoings have been assessed and addressed, and the business has been restructured, the next step is to consider plans to move forward and recover.
With the help of a reliable insolvency company, consider your company’s processes and procedures in every department. Consider whether your business is customer-centric or not; ultimately, the majority of your revenue will come from your customers buying your products or services. Focus on strategies that will help to retain existing customers as well as measures to attract and gain new customers, as well as regain former customers.
In some cases, there may be the possibility of diversifying into new product or service lines, repurposing products or looking at penetrating a new industry. For example, if your company supplies sports equipment to gyms and schools, consider promoting your equipment to people with home gyms, especially as more people are exercising at home due to the pandemic. Alternatively, perhaps offer an advice line or consultancy service alongside your product offerings to help customers after they have bought your product. Identifying add-on services not only helps retain customers, it also provides an incentive to attract new customers and provide your business with a competitive edge.
Take advantage of government support
In the current business climate with the ongoing coronavirus pandemic which is slowing down the economic recovery of businesses across the UK, the Government provides a variety of financial support options. Whilst there are eligibility criteria, it is always a good idea to investigate whether your business qualifies for support, such as one-off grants, access to funding and support with company obligations, like Statutory Sick Pay (SSP).
However, it must be remembered that any financial support from the Government or other financial institutions must be paid back at some point. Therefore, if there is the possibility that you will be unable to make the necessary payments in the future, avoid taking on more debt.
Company or individual insolvency is not something that anyone wants to deal with; however, the sooner a financial problem is recognised, the sooner it can be dealt with and the more potential the company has in recovering. If you are struggling with debt or are considering winding up a solvent company, contact Simple Liquidation for assistance. For more information on how our professional insolvency practitioners may be able to help your business, contact us today.