Cash-Flow Problems?
The single biggest killer of SME’s is not profit but cash.
Are you worried about being insolvent?
The accounting and legal definitions are very different. Not being able to pay your company debts as they fall due makes your business insolvent. It does not matter that you are owed money by others, the critical measure is not being able to pay debts that are due.
Worse, directors can be found personally liable in a number of situations. One example is Wrongful Trading:
Wrongful trading is a section under the Insolvency Act 1986 that involves directors, knowingly making transactions in and out of the business, with the knowledge that the company is insolvent. If directors are found guilty under the Insolvency Act, they can be made personally liable for creditor debts.
It is deeply painful for many business owners that are trying to look after customers and staff alike to be personally punished financially, in some cases even made bankrupt and perhaps even struck off as a director for years to come.
In 2008 Paul and Aniko had a lunch meeting with the Managing Director of a company they owned. The MD was not happy at the end of the lunch because he could not get Paul and Aniko to support a course of action he wished to take. In business nobody agrees with everybody all the time. They all shook hands and left the restaurant.
What the MD did next was shocking. He went back to the office, got one other director, the most junior of all the directors to agree that the MD could withdraw from the bank a bonus payment. This was not authorised by any of the owners or directors. He used the junior director to approve internet bank transaction and simply took £20,000 in cash.
He then resigned and set up in competition.
Incredibly there was no legal recourse available.
Despite this Paul and Aniko refocussed, grew the business and sold it for a very good price one year later. They focussed on the solution not historical events, legal battles and because they knew how to free up cash from the three places in the Profit and Loss accounts, where cash hides, they did not even need to put more cash into their business.
Businesses get into cash-flow problems frequently, it is a problem very often associated with growth or unforeseeable events.
To swiftly benefit from decades of experience managing cashflow in variety of SME businesses just fill in THIS FORM tell us about your issues and we will be in touch.