Categories
Cash Flow & Forecasting County Court, Legal & Litigation Debt Collection & Credit Management

Winding-up petitions in detail

Although the restrictions on debt collection have been mostly lifted from 1 October 2021, some limits remain on the use of Winding-up petitions until March 2022.

  1. Petitions can only be sought on debts exceeding £10,000 compared with the pre-pandemic threshold of £740.
  2. Creditors must give debtors 21 days to propose resolutions.
  3. WUPs cannot be used for pursuing commercial rent arrears but….

…the sting in the tail is that debtors will still be able to seek county court judgements to try to recover commercial rent arrears.

As always, we advise businesses in difficulty to manage their cash flow and to seek help.

You can download our free cash management tool here https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/37139976-4f42-454f-aff5-75ae4be992c7

Or message us if you need someone to talk to.

Categories
Interim Management & Executive Support Rescue, Restructuring & Recovery Turnaround

Turnaround Options – Can the business be saved?

Thank you to Carol Baker for including us in her article ‘Business Recovery Part 2: Turnaround Options – Can the Business be Saved?‘ for AccountingWeb.co.uk.

Business Recovery part 2: Turnaround options – can the business be saved?

By Carol Baker

In our first article in this business recovery series, we looked at how you can spot the warning signs that a business may be struggling and offered practical advice on how to support clients at risk of failing. In this second article, we’ll look at how a turnaround specialist can offer an alternative to insolvency.

Many accountants make the mistake of thinking that to turn around a struggling business you must enter a formal insolvency process. This is not always the case as Mark Blayney, turnaround specialist at K2 Partners explains, “Turning around a business is more than just restructuring the balance sheet – it is about strategy and reorganising the whole business to make it into something that is viable going forward.”

“The danger happens when directors say, ‘Let’s go into a Company Voluntary Arrangement (CVA) and write-off 75% of the value of our creditors’ believing they have turned the business around. No, you haven’t turned your business around, because you have failed to address the fundamental underlying problems which got you there in the first place.”

It is important to distinguish between the ‘company’ and the ‘business’. Often a business can be saved, but not always the company’s legal entity, especially when there are conflicting interests amongst the directors which have brought the company close to insolvency.

At this point, the question becomes ‘Can the business be saved?’

A turnaround specialist is like a polymathic crisis manager who has a deep and complex knowledge that they can call upon to solve specific problems, and to do so – fast!

They have a unique ability to come into a business and take hands-on responsibility for delivering the actions required. This means in the early crisis management stages they have to quickly analyse the situation – often having to work with inaccurate and incomplete data – and use their intuition to make decisions. 

These decisions need to be made without emotion or influence from shareholders, directors or management. The highly analytical mind of turnaround specialists gives them unique behavioural skills and a management style which oozes creditability and trust. They bring calm to what is often regarded as chaos, but this stabilisation is only the first step. Real turnarounds then require rebuilding and reorganising the business for secure growth.

A two-step process for business turnaround

Whilst some turnarounds can be done with the company name and the business intact, at other times, the ‘business’ may need to be put into a new vehicle – simply because there is too much baggage associated with the company. But ultimately, turnaround is all about transforming the business including its strategic focus and operations.

First, there is the stabilisation phase – getting more cash into the business to pay staff wages and provide immediate working capital. A turnaround specialist’s first priority is to quickly get control of cash and cashflow such as finding non-essential costs to see where cash is being diverted unnecessarily, and produce a comprehensive (and tested) cash management forecast that identifies the areas which are fundamental for the business’s survival and growth.

“As independent advisers, turnaround specialists don’t have the emotional attachments that directors have, so it is easier for us to go to a lender or creditor and negotiate a repayment plan,” says Tony Groom, turnaround investor at K2 Partners.   

“Not only is this preferable to the director giving a personal guarantee – but suppliers are normally paid on a proforma basis, while a payment plan for old debt reduces the exposure, and secured lenders receive ongoing reports about the business and the turnaround initiatives as to reassure them about continuing with their support.”

A greater awareness of the funding tools available   

“We work with a range of funding solutions and have a deep knowledge of the market and where to source finance,” continues Groom.  “As such, we are well placed to advise directors how to facilitate restructuring of the debt by selecting the right financing option that will free up cash, reduce costs, and set the business back on the path of profit – often to the delight of all stakeholders.”

It is during this phase that the turnaround specialist will produce a ‘three-way forecast’ consisting of cashflow, profit & loss and balance sheet. From this, the turnaround specialist can see the predictions unfolding and how the core business can be strengthened.

Returning a business to growth

The second phase of turnaround is the growth phase, and this still requires a real hands-on approach by the turnaround specialist. “You have to get into the real nitty-gritty of the business to find those parts which really work and do more of the same; but more importantly, stop doing those parts of the business which don’t work,” says Blayney. “This trial and error approach becomes the basis of ongoing restructuring while at the same time growing the business.”

During the transformation, every aspect of the business needs to be addressed.  This involves looking deeply into the operating procedures and systems across the whole of the business, such as looking at whether the marketing strategy and promotion initiatives are right for the business; and whether it has in place the right IT infrastructure and software to handle the growth. 

As Jeremy Blain, CEO and author of ‘The Inner CEO – unleashing leaders at all levels’ says, “Many businesses are crying out for a new business model to help them successfully transform and propel them into a prosperous and exciting future. With many organisations restructuring, especially around digital, it is even more important that executive leaders’ have a more collective approach to leadership and business health.”

Successful turnarounds require collaboration

After the impact of Covid-19 turnarounds are becoming an all-too-familiar part of business life, the key is to devise a structure that will keep the reviving business nimble enough to compete. 

Implementing a turnaround relies on the clients’ existing accountants working with the turnaround specialists to look after the long-term interests of their clients, and as the adviser being the sounding board for their clients while turnaround specialists perform their magic. 

It also requires the cooperation and support of all parties – the board, management team, staff, customers, suppliers, lenders, and the turnaround specialists working together. It must be a team effort, and there must be a commitment to follow through on the actions necessary from all parties if the turnaround is to be successful. But when that doesn’t happen, and the business can’t be saved, then the only option is formal insolvency – which will be the subject of our next article.

Categories
HR, Redundancy & Trade Unions

Tricky dilemma over staff?

In our Board Briefing published last autumn we covered the issue of making employees redundant if necessary when furlough came to an end.

https://www.linkedin.com/pulse/planning-redundancies-after-furlough-discontinued-tony-groom/

But since then, it has become clear that there are staff shortages in many areas and businesses cannot find the people they need going forward.

With Furlough due to end at the end of this month this is a tricky time for employers.

You may need the staff to get your business activity back to more “normal” levels but after more than a year of disruption and lockdowns your cash flow and balance sheet may be at a very low ebb and not able to support the overheads associated with retaining staff, never mind recruiting more people.

So what to do?

Clearly you need to retain the goodwill of existing employees, even if you are considering redundancies in the immediate term.

As our briefing points out, communication, keeping them informed and treating them fairly are all key to this.

Our briefing asks the board: “Are we thinking strategically enough about a future beyond the immediate crisis?”

Perhaps it is time to seek additional help from a turnaround adviser?

Categories
General

Lessons and new opportunities from pandemic disruption

Business activity is starting to pick up after 18 months of disruption but what lessons have those that survived learned, what new opportunities has it brought and what new practices will businesses keep as a result?

Changes in customer and client needs?

A recently-reported development has been the numbers of staycation bookings for 2022 that are already being made after people decided to holiday in the UK in 2021 due to all the complex rules overseas travel and quarantine on return. 

This presents an opportunity for the tourism industry to develop their attractions and offers, notwithstanding some of the difficulties there are in recruiting enough workers.

There may well be opportunities in other businesses in the wider economy to respond with new products and services based on what clients have asked for during the various stages of the pandemic.

Changes in ways of working

While some businesses needed to furlough staff because of a drop in demand during the pandemic others changed to a working from home (WFH) model.

This had implications both for business overheads as well as for the future of employment as many employees have indicated that they liked the WFH way of working and would like it to continue.

It has reportedly had no effect on productivity so businesses may be able to continue with employees working in this way with some additional investment in remote IT support and monitoring.  This investment could be offset by businesses no longer renting or leasing large city centre office complexes and thereby saving on overheads.

In manufacturing and business processes IT is also likely to yield benefits.  The introduction of robotics and AI in manufacturing is an obvious benefit after the initial investment.

Similarly automating and/or outsourcing some business processes will help to reduce overheads and improve profit margins.

Slow and steady is the key to getting back to full production

While businesses may be keen to get back to their pre-pandemic levels of activity it should not be done too quickly.

Although restoring the balance sheet is a key issue, there is always a danger of overtrading, by accepting more orders than the business can realistically fulfil. Failure to fulfil those orders can lead to problems with key suppliers the business may end up unable to pay and to reputational damage with both them and unsatisfied customers.

If there is a need for more capital to invest in the business it should be wary of both predatory lenders imposing onerous interest rates on loans and demanding directors’ guarantees. Similarly venture capital can come with problems for a business if the investor is too focused on short term returns on the investment and not willing to give the business time to grow sustainably.

Mergers and acquisitions may be a solution to business development but again should be looked at carefully before committing.

Ultimately, a business wanting to grow sustainably needs to know exactly where it is financially at all times and our free cash management tool can help you to do this.

https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/37139976-4f42-454f-aff5-75ae4be992c7

Categories
Cash Flow & Forecasting

Where are you heading?

If your business has survived the last 18 months of uncertainty you may be hoping that activity will soon return to “normal” levels.

But there is still a good deal of uncertainty about the future given the number of issues facing businesses.

The supply chain has been disrupted, both because of the pandemic and in the UK a shortage of HGV drivers following the decision to leave the EU. Surveys from the CBI lobby group show the worst manufacturing supply chain disruption since at least 1977.

Recruitment of suitably qualified staff and shortages of materials are also an issue even if a business can afford them. 

Then, the Furlough help ends completely at the end of September and the Covid loans are having to be repaid.

All in all, making decisions about the future of your business is far from easy.

Some time ago I suggested the use of heuristics as a method of help in decision making in times of uncertainty and you can see my article here:

https://www.linkedin.com/pulse/heuristics-offer-alternative-way-dealing-uncertainty-tony-groom/

Above all, it is more than ever important to manage your cash flow to aid your decision making and there is a free tool for you to download that can help you:

https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/37139976-4f42-454f-aff5-75ae4be992c7

Categories
Accounting & Bookkeeping County Court, Legal & Litigation

The tip of the iceberg?

The High Court has closed down two businesses this month after it was found that they submitted false documents to at least 41 local authorities and the government’s bounce back loan (BBL) scheme to secure £230,000 worth of emergency support.

LV Distributions and SIO Traders were investigated by the Insolvency Service, which proved that neither company had ever actually traded.

One of the two had been claiming to supply personal protective equipment while the other had claimed to sell medical care products.

The Government has warned that it will be cracking down on Covid fraud and in June the Public Accounts Committee of MPs, for the department for business, energy and industrial strategy (BEIS), that suspected Covid-related fraud amounted to £27bn.

It has been argued that some of this loss could be attributed to a failure to carry out basic checks and controls in the rush to get funding out to struggling businesses.

The message is clear.

Businesses need to make sure their paperwork is complete, clear and verifiable to avoid accusations of fraud and to keep a close eye on their cash flow if they are struggling to repay Covid-related loans.

We have a free tool you can download to help you https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/0a02193a-12a8-432b-8b19-81bc4f8a8b74 and we’re always available by phone if you need further help.

Categories
HR, Redundancy & Trade Unions

Is it crunch time for your business at the end of September?

The Government’s furlough scheme to help employers through the pandemic is being scaled back, with wage support being reduced from 70% to 60% and employers’ contribution increased to 20% this month.

The whole scheme will end on 30 September.

One survey carried out this week has found that an estimated 350,000-plus SMEs cannot now repay Covid loans due to the impact of cash flow and supply chains. 

An estimated 18% of the survey participants reported that they intended to make redundancies while around 16% said they could not afford to pay existing staff because of the pressure of repaying Covid-related loans.

At the same time, it has been widely reported that businesses have been facing difficulties in recruiting staff in some sectors.

So what should businesses do?

Try to hang on to staff in the hope that business will pick up?

Make some redundancies now to improve their cash flow and hope to rehire staff in better times?

How you treat your staff will affect your reputation as an employer.

Our briefing on planning redundancies will help you get it right:

https://www.linkedin.com/pulse/planning-redundancies-after-furlough-discontinued-tony-groom/

Categories
County Court, Legal & Litigation Debt Collection & Credit Management Personal Guarantees

Directors with personal guarantees take note

Bailiffs (High Court Enforcement Officers) were given permission by the High Court earlier this year to use remote access technology, such as Zoom, to seize personal assets from debtors.

As with personal visits by bailiffs to people’s private homes, virtual access will require the consent of the debtor.

The idea is that the parties involved will set up a Zoom, a WhatsApp or a Facetime call where the debtor shows the Bailiff around their property allowing the latter to list property to be made the subject of a controlled goods agreement.

The debtor may not then sell or dispose of the goods included and under the arrangement they may remain in the home while they carry out a repayment plan.

The judgement was made in January 2021, when Covid lockdowns precluded bailiffs from entering private homes. It was in part seen as a way of carrying out enforcement action while protecting bailiffs from the risk of catching Covid.

It is also seen as helpful to debtors in that they will continue to have the use of their property during a lengthy repayment plan.

Among the goods that cannot be seized are: 

  • Vehicles or computer equipment needed for work 
  • Things that belong to other people who are not named on the debt.
  • Things needed to cook food e.g., cooker or microwave.
  • Fridges
  • Mobile phones
  • Tables and chairs for the family

For those bailiffs dealing with a company, they are likely to continue to visit the premises since it is easier to gain entry as most business premises are open to the public or at least don’t lock their doors to visitors. Once inside they can go anywhere to ‘seize’ goods so long as they are not forcing entry through locked doors.

Categories
General

Why take time out for a walk in nature?

No matter how busy I am I try to take a walk in the countryside at regular intervals.

Why? Because it is refreshing, invigorating and most importantly good for my mental health.

It is something for stressed business leaders to try to build into their undoubtedly busy lives. 

The temptation to focus exclusively on the problems in a business to the exclusion of all else may be great but good leadership and making the right decisions depends on a leader having good mental health.

But actually, taking time out away from the office and allowing the mind to roam free during a walk could well result in new solutions emerging to the problems besetting you.

As the recent decision by US gymnast Simone Biles to pull out of the Olympics finals recently demonstrated she said she felt she could not perform at her best because of issues with her mental health.

It’s a lesson stressed business leaders could learn. 

Categories
Banks, Lenders & Investors General Insolvency

Director scrutiny over covid loans

Closing an insolvent business is a horrible experience but disqualification from being a director is even worse.

In a recent case in the North of England the director of a retail business was disqualified for 11 years after it was concluded that he had overstated his turnover when claiming a Covid Bounce Back loan.

The regulations state that eligibility for a loan was in doubt given that they should be for less than 25% of the previous year’s turnover.

It appeared that the business had already ceased trading the previous year but insolvency officials said he should have known that turnover had been insufficient to qualify for the loan, which was paid out in May 2020.

It also found that he had failed to provide sufficient records to establish what the funds were used for.

This situation emphasises the duties on directors to not only keep accurate and detailed financial records but also to ensure they comply with all their duties when applying for a Covid-related BBLS or CBILS loan or when a business is insolvent.

Any investigation of formal insolvencies will look closely at loan applications and the use of funds.

Disclosure and directors’ reports should cover the circumstances of any loan.

Our Board Briefing on inoculating your board during coronavirus is helpful for directors in understanding their legal duties.

You can view it here: https://www.linkedin.com/pulse/directors-need-understand-duties-liabilities-whatever-tony-groom/

It is distressing enough to have to deal with closing down a business into which you have put your time and energy – much worse is to be disqualified for regulatory failures and be prevented from starting afresh.

Categories
General

Leadership is about knowing when to ask for help

Businesses have faced a perfect storm of troubles during the Covid pandemic, leaving many of them perilously close to insolvency.

Now as the various support schemes come to an end they are also facing having to start paying back Covid loans and deferred VAT at the same time as trying to get their business activity back to full production in the face of supply chain shortages and potential recruitment difficulties.

It’s a tough and painful situation but it can be compounded if the leader(s) of the business try to struggle on, or live on hope, rather than acknowledging that it’s time to call in help.

Leadership is often assumed to be about knowing what to do in all circumstances.

But it is unrealistic to assume that any one person has all the answers, especially when faced with a situation unlike anything that has gone before. Whether it is from pride or fear, the outcome from soldiering on is not likely to be good.

Effective leadership is about knowing your limits and when to call in help from the experts.

So don’t despair. We have a number of free tools for download that can help businesses to get a grip on their situation.

They include our Cash Management tool: https://www.linkedin.com/smart-links/AQF0zn8hTCKbSw

And our Guide to dealing with CCJs: https://www.linkedin.com/smart-links/AQECtjYmuU4aNA?lipi=urn%3Ali%3Apage%3Ad_flagship3_company_admin%3BT8pIrBPJRZacMnpp5QR9cA%3D%3D

And we are here to take your calls if you’d like to talk to a real human being with experience of rescuing and turning around businesses.

Categories
County Court, Legal & Litigation

County Court Judgments and how to deal with them

CCJs are generally awarded against a company as the result of the business failing to pay a bill. This is either a consequence of not being unable to pay bills due to a lack of cash, or a failure to effectively respond to a claim. 

Whatever the reason, incurring a CCJ gives rise to significant business risks which need to be addressed.

CCJs give rights to claimants that allow for an escalation of enforcement that can significantly increase pressure on a company. 

These rights include the right to appoint enforcement officers to seize goods and the right to issue a winding-up petition to close the company.

CCJs are public judgments which are closely monitored by banks, credit reference agencies, lenders and suppliers. They will therefore not only have an adverse impact on the company’s credit rating and ability to obtain credit from suppliers but are also likely to trigger a review of the account by the company’s bank or secured lenders.

Read our new Board Briefing on CCJs here:

https://www.linkedin.com/smart-links/AQECtjYmuU4aNA?lipi=urn%3Ali%3Apage%3Ad_flagship3_company_admin%3BT8pIrBPJRZacMnpp5QR9cA%3D%3D
Categories
Accounting & Bookkeeping HM Revenue & Customs, VAT & PAYE

Will HMRC comply with the Business Secretary’s advice regarding VAT deferral repayments?

The Covid pandemic and the restrictions that have had to be imposed to try to contain it have been difficult for businesses.

It is still by no means certain, given the rise in case numbers due to the latest Delta variant, whether further restrictions or lockdowns will have to be imposed.

The UK Business Secretary Kwasi Kwarteng said recently “the “path back to full trading will be difficult for many companies, particularly those with accrued debt and low cash reserves”.

However, as the various relief schemes come to an end businesses will have to find the money to pay back their debts and liabilities even as they struggle to get back to full activity.

Currently the most pressing is the deadline for paying back deferred VAT and PAYE.

Last year businesses were allowed to defer VAT payments due between 20 March 2020 and 30 June 2020 until March 31, 2021 without incurring charges or penalties.

They could also join a special repayment scheme to spread payments as long as they did so by June 21, 2021.

They may be charged a 5% penalty or interest if they do not pay in full or make an arrangement to pay by 30 June 2021.

Recently, Kwarteng wrote to business groups, including the Institute of Directors and restructuring body R3, to assure them that HMRC “would soon update its enforcement methods, so that outstanding debts could be brought into managed arrangements for Covid-torn companies.” 

He promised that the use of insolvency procedures would be a last resort.

Although he has reassured businesses struggling to repay debt and recover from Covid pandemic restrictions that HMRC will take a “cautious” approach to recovering money owed to the Government, there may be a sting in the tail.

He said that HMRC would take a flexible approach “to those businesses that engage with it” and added “a return to normal insolvency processes will be vital for a healthy economy”. 

The Government estimates that more than half a million businesses deferred VAT payments last year, for which repayment has been due since March 2021.

There is no doubt that the numbers of insolvencies have been relatively low throughout the pandemic.

The most recent quarterly Begbies Traynor red flag alert published in April 2021 revealed, however, 723,000 businesses were in ‘significant financial distress1’, a 15% increase from Q4 2020 and a 42% year-on-year increase.

They also reported that insolvencies were currently “artificially suppressed … partly due to a ban on winding up petitions with regard to Coronavirus related debts.”

Nevertheless, according to R3, corporate insolvencies increased by 8.8% to 1,011 in May 2021 compared to April’s figure of 929 and increased by 6.9% compared to May 2020’s figure of 946.

The main driver, it reports, has been CVLs (Creditors’ Voluntary Liquidations) although “it’s too early to say whether the mild increase in corporate insolvency numbers is the start of something bigger”.

The question is whether HMRC will adhere to the Business Secretary’s promise or compound businesses’ recovery difficulties.

The Finance Bill 2020 gave preference to certain debts (VAT and PAYE) due to HMRC in the event of insolvency. This means that money owed for these two taxes must be paid to HMRC while other creditors, including suppliers and unsecured creditors holding directors personal guarantees, take second place.

HMRC has a reputation for being highly demanding when trying to recoup liabilities such as VAT payments.

This is more likely to be the case where businesses have ignored their communication and a failure to respond can often lead to greater problems.

So will HMRC adhere to the Business Secretary’s promise to “take “a cautious approach to enforcement of debt owed to government that will have accrued” during the pandemic”?

There is a precedent in that HMRC introduced the a TTP (Time to Pay) scheme in the wake of the 2008 financial crisis.

Clearly, it can be flexible in times of significant financial pressure.

However, the crucial point is that HMRC does not take kindly to being ignored.

Nor is it likely to be impressed if a debt-laden business pays unsecured creditors first. In this case the directors could be in the position of being held personally liable for the preferential payments. 

It is therefore essential that businesses continue to monitor their cash flow and we have a free tool to help you: https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/0a02193a-12a8-432b-8b19-81bc4f8a8b74

Categories
Accounting & Bookkeeping

We are now on our way to ‘paperless’!

We may be a bit late to going paperless but our latest purchase has made us fervent converts.

We recently bought a BROTHER – MFC-L8690CDW All-in-One Wireless Laser Colour Printer for £324 plus VAT from Currys PC World. The key feature for us is its programmable short cut buttons on the touchscreen keypad for scanning documents.

We now scan inbound post to folders which are often remote. For instance K2 accounts mail to a ‘K2 Mail Accounts’ folder on the K2 server which is shared with our remote bookkeeper. We no longer deliver it by hand.

It also allows us to scan mail received here at our registered office directly into shared folders for each company and saves us the previous faff of scanning documents, converting them to PDFs and forwarding them by email as attachments.

Using it has also revolutionised our document storage as we no longer need to hold hard copies of most documents.

It also taught us a lesson – that old practices from the past may no longer be the most efficient and productive as a business grows.

Is it time you had a look at your business processes to save yourself time and improve efficiency?

Categories
Banks, Lenders & Investors Cash Flow & Forecasting

The 12 month loan repayment holiday has ended

The 12 month loan repayment holiday has ended. Small businesses are due to start repaying Covid support loans following the end of the loan repayment holiday.

Bounce back loans were first launched last May, and banks extended £46.5bn to 1.5m SMEs but reports say that already a fifth of SMEs have asked for more time to pay.

One accountancy firm, Mazuma Accountants, says a survey they carried out at the end of May revealed that as many as 39% of small businesses believe they would struggle to meet repayments.

According to the FSB (Federation of Small Businesses) many are unaware of banks’ pay as you grow schemes, which could help with managing the repayments but warns they should ensure they are clear about the impact schemes could have on their future credit needs.

The business environment is likely to remain tricky for many for some time to come and it will take time to ramp up to full activity, especially in the face of uncertainty about lockdown easing, materials shortages, in construction in particular, and also the difficulties some are having filling vacancies.

In the meantime we would always advise that you focus closely on your cash management and we have a free tool to help you. Download it here:

https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw
Categories
General

Pressure on construction businesses as materials are in short supply

Building materials are running short in the UK putting pressure on smaller construction businesses.

Supplies of timber, cement, steel, paints and some plastic products have been particularly affected leading to a prediction that materials prices could rise by as much as 7% this year.

More problematic is the effect the shortages may have on smaller construction companies to keep trading leading to cash flow problems, according to the Construction Leadership Council (CLC).

The Federation of Master Builders has said some building firms may have to delay projects while others could be forced to close.

The shortage is being attributed in part to a surge in DIY and building projects during lockdown as well as a surge in shipping costs.

The CLC has called on large construction companies to work with smaller builders to collaborate on bulk buying which the SMEs are unable to manage alone.

In the meantime we at K2 would urge SME builders to take advantage of our offer to download its free cash management tool to protect themselves against the ebbs and flows of income. 

Available here: https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw/0a02193a-12a8-432b-8b19-81bc4f8a8b74

Categories
Insolvency

Insolvencies. Now is not the time to relax

The most recent Insolvency Service figures have revealed that company insolvencies are 35% lower than before the coronavirus crisis.

The report shows that 925 companies were declared insolvent in April compared with 1,429 in the same month in 2019 and 1,199 last year.

However, we are only at the start of recovering from various interruptions to business and from lockdowns.

Also, sooner or later the Government’s temporary restrictions on the use of statutory demands and on certain winding-up petitions will come to an end.

It is therefore likely that as businesses start to pay back their various Covid-related loans and other deferred payments, insolvencies will rise again.

Begbies Traynor’s most recent Red Flag alert for Q1 showed that 723,000 businesses were now in ‘significant financial distress1’, a 15% increase from Q4 2020 to Q2 2021.

Given all the above, we would urge businesses to continue to very carefully manage their cash flow and beware of over-trading in their desire to quickly get back to as near normal activity as possible.

We have a helpful, new, free cash management tool for download. Click the image below to visit the download page.

Categories
Cash Flow & Forecasting Debt Collection & Credit Management

Loan repayments, price rises and supply chain issues – a perfect storm?

As government support for businesses during the pandemic comes to an end a combination of circumstances means it is more important than ever to keep a careful eye on cashflow.

Common sense would suggest businesses should be allowed time to return to full-scale activity and repair their cashflow before they start paying back business support loans or deferred VAT.

However, according to the FSB (Federation of Small Businesses) chief of external affairs Craig Beaumont members are reporting that they are already receiving repayment demands.

While the IHS Markit’s purchasing managers’ index (PMI) for manufacturing activity shows that the sector expanded at its fastest pace in almost 27 years in April they are also being hit by price inflation and supply chain delays.

As an example, British Steel has this month announced a price rise of £50 per tonne for structural steel, its seventh price rise since the summer of 2020.

Businesses needing help can access this survival guide on LinkedIn https://www.linkedin.com/smart-links/AQGnS8URPakZcw

And K2 will soon be launching its free cash management tool https://www.linkedin.com/smart-links/AQG7fCQTtXx4Zw

Categories
Banks, Lenders & Investors Cash Flow & Forecasting

Cash flow and Bank management

The potential for unmanageable debt and for overtrading are identified as two key pitfalls for businesses as they seek to recover from lockdown.

In the latest red flag alert from Begbies Traynor warned that 93,000 more UK businesses had “weakened to the point of ‘significant financial distress’ in the quarter to the end of March”.

The company predicts that even more companies could slide into insolvency as lockdown eases, citing the reasons above as two likely drivers.

K2 Partners has warned before about the dangers of overtrading, when a business tries to ramp up its activity too quickly, running up a big rush of sales on credit without the cash to pay its suppliers.

Our advice is to always and stringently monitor and manage cashflow and beware of being misled by Balance Sheet figures, which can paint an over-optimistic picture because they include fixed assets and possible new money from investors.

K2 will soon be offering a free Cash Management tool for businesses to download and use.

In the meantime, businesses should also concentrate on maintaining a good relationship with their bank and there is some guidance here https://www.linkedin.com/smart-links/AQF0zn8hTCKbSw to help you.

Categories
Banks, Lenders & Investors

Businsses should consider the RLS implications carefully

Can your business cope with another loan?

The latest Government initiative to help businesses to get back on their feet following the pandemic lock-downs came into effect on April 6, 2021.

The Recovery Loan Scheme (RLS) announced in the March budget is only available until December 31, 2021 and so far, just 18 lenders have signed up to participate.

They can be found here on the British Business Bank website.

Be aware that ultimately the lenders will decide whether to approve your application and not every accredited lender can provide every type of finance available under RLS.

There are some protections for borrowers in that lenders will not be allowed to take any form of personal guarantee for facilities of £250,000 or less. Above that amount lenders cannot include Principal Private Residences in the guarantee agreements and that the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.

Loans will include 80% government guarantee and interest rate cap and can be used in addition to previous loan schemes such as BBLS and CBILS.

What are the types of RLS?

  • term loans or overdrafts of between £25,001 and £10 million per business
  • invoice or asset finance of between £1,000 and £10 million per business

What is the maximum loan period?

  • up to 3 years for overdrafts and invoice finance facilities
  • up to 6 years for loans and asset finance facilities

Who is eligible?

You can apply for a RLS if your business is trading in the UK, would be viable if it were not for the pandemic and has been adversely affected by it. You cannot apply if your business is in collective insolvency proceedings.

What to consider if you are thinking about applying for a RLS

Essentially, it comes down to whether a loan would be affordable or not given the relatively short repayment terms.

Do you regularly monitor your cash flow and once your business is able to trade normally the state of your order book and overheads? What is the value of any fixed assets your business has?

Have you already taken advantage of any of the other pandemic emergency loan schemes? Will you be able to manage the repayments on top of all your other business overheads?

If your bank is one that has signed up to the scheme then it may make sense to approach them first as you already have a, hopefully good, relationship with them.

K2 Business Partners has published a number of guides to managing your relationship with your bank and these are available here

There is also a Board Briefing on the topic of your relationship with your bank here

If you are uncertain about whether to take advantage of a loan under the RLS perhaps it will help to talk it over with an experienced restructure and recovery advisor first.

Tony Groom of K2 Partners has more than 20 years’ experience in advising businesses and you can get in touch with him via a message on LinkedIn, or by calling 020 7720 8000 or emailing: info@k2-partners.com.

Categories
HM Revenue & Customs, VAT & PAYE

Furlough fraud and directors’ liabilities

The spotlight is turning to company directors as HMRC continues to crack down on fraudulent claims for furloughing staff.

The latest figures show that over 11 million workers have been furloughed in the UK and 41% of employers had staff furloughed. As of January 2021, HMRC had received over 21,000 reports of potential furlough fraud.

The March 2021 budget included an investment of £100 million for the creation of a taskforce to tackle fraud within the furlough scheme.

Among the HMRC powers are the ability to charge individual directors found to have played a role in fraudulent claims under the Criminal Finances Act 2017.

HMRC Attention is particularly focused on claims by insolvent companies or companies where there is a “serious possibility” of insolvency. Directors may face claims for breach of their statutory duties and disqualification under the Company Directors Disqualification Act 1986.

Download our Board Briefing, Inoculate your board against Coronavirus here and if you need help call 020 7720 8000 or email: info@k2-partners.com.

Categories
General

Is a lack of people with suitable digital skills affecting your business future?

Fewer than half of British employers believe young people are leaving full-time education with sufficient advanced digital skills, and 76% of firms think a lack of digital skills will hit their profitability.

The Learning & Work Institute also calculated that the number of young people taking IT at GCSE has gone down by 40% since 2015.

It has been predicted that the future of successful business post pandemic will be in the increasing adoption of robotics, AI and remote digital solutions such as cloud storage and video conferencing.

But is it fair for employers to employers to place responsibility on the education sector? In a fast-changing landscape, how do schools and colleges judge exactly what practical digital knowledge will be needed, especially in such a diverse sector?

There is also an argument that at least some of those skills are best learned “on the job” rather than in an exclusively academic environment.

Should employers become more hands on in working with schools and in using all the various schemes such as apprenticeships and Kick Start to play a more active role in ensuring their employees, present and future can gain the digital skills needed for the future?

Categories
Banks, Lenders & Investors Cash Flow & Forecasting

Does your business really have enough cash?

Nursing your business through the pandemic lockdowns successfully is one thing, but there is a danger in ramping up activity too quickly as the situation eases.

Accountants call it over-trading.

This is when a business runs up a big rush of sales on credit without the cash to pay its suppliers and can rapidly become insolvent.

It is easy to be misled by the figures on the balance sheet, which may paint an over-optimistic picture of the cash flow forecast, especially when some of this is predicated on fixed assets and on the prospect of new investment from lenders or investors.

Instead, the business should focus on cash management, which gives a much more realistic picture of assets and liabilities.

K2 will soon be offering a free Cash Management tool for businesses to download and use.

Categories
Rescue, Restructuring & Recovery

Leaner, fitter and facing the future with confidence?

As lockdown restrictions are gradually eased businesses will be preparing to increase their activity.

But how many of them will emerge as very different organisations from the ones they were at the start of the pandemic?

Some have already changed their offering or target markets to meet the changed conditions, like the marquee rental company that pivoted to offering equipment to clients needing extra space for temporary canteens, classrooms or even warehouses.

The pandemic has forced many businesses to look more closely at their offerings, their processes and the way they work for the longer term.

These already include including switching to using remote working and intending to continue wherever possible, thereby reducing both their office space and their overheads. Manufacturers are likely to automate production lines and introduce AI and robotics.

There will be more investment in internet-based technology, remote staff surveillance to cloud storage and enhanced security systems.

Economists argue that all these changes could lead to a significant rise in productivity after years of being sluggish.

There will also be more investment in R and D and in training and re-skilling staff to be competent in managing new processes.

Categories
Accounting & Bookkeeping Cash Flow & Forecasting

Ignore it and it will all go away?

It is very tempting in the current “abnormal” circumstances to ignore the warning signs that a business may be heading into difficulties.

But there is no telling for how much longer the current pandemic restrictions will continue and much of the support offered to businesses has been in the form of loans, or extensions to payment deadlines, that will have to be paid back.

Ignoring it all in our experience does not make situations go away, merely postpones the inevitable reckoning or actually makes the situation worse.

Directors need to continue with their monthly management accounts reviews, their checks on their balance sheets and their revenue generation despite the current circumstances.

They also need to understand their duties and liabilities.

Things may be grim, but there is still help out there.

K2 Partners has a number of guides to help businesses available in the Knowledge Bank of the Online Turnaround Guru website. They cover everything from dealing with debt collection to maintaining good communication with the bank, the essentials of directors’ duties and managing stress and anxiety.

There are also several helpful Board Briefings in the Resources section of the K2 Partners website.

Crucially, there is no need to behave like an ostrich and bury your heads. We are available if you need help and support or just someone to talk to. 

Categories
Banks, Lenders & Investors

Keep talking to your bank manager

At some point lockdown restrictions will be eased and businesses will be able to trade normally again.

Many will need the help and support of their banks to recover and grow.

Boards therefore need to ensure that they fully understand how their lenders view the company and actively manage their banking relationship to maximise bank support over this period. 

So, even if business activity is at a low ebb at the moment, it is important to maintain communication with the bank manager and to continue to nurture the relationship.

Remember, banks see their role as secured lenders who never expect to write off loans. They are not entrepreneurs, they do not have an equity upside, so risk management of their portfolio of customers is key.

Take a look at our Board Briefings on banking issues and our Partner Mark Blaney’s book on Amazon. Take a look and get in touch if we can help.

Categories
Uncategorized

Tony Groom hosts a TMA Webinar in Partnership with London Business School

COVID-21: Present and Future of Corporate Turnarounds

2020 was a gruesome year and many of us impatiently waited for its end. However, what will Covid-19 bring this year? Will 2021 be a year of renewal and opportunity or should we brace for impact? On 2nd September TMA UK and the London Business School Turnaround & Restructuring Club joined together to host a discussion on what businesses will look like very soon and in the long-term.

K2 Partners Tony Groom moderated the discussion between a panel of experts who took a look at distress from a number of perspectives and discussed which entrepreneurial and career opportunities are open for people interested in working in the distressed sphere.

If you would like to watch the recording you can do so here.

Panel Moderator

Tony Groom, Chief Executive, K2 Business Partners

Speakers

Karthik Dasari, Founder, Tern Capital

Ivelina Delcheva, Chief Operating Officer, AUTO1 FinTech

Rada Dimitrova, Director, Restructuring and Special Situations Group, KPMG

Categories
Business Development & Marketing

Have you been tempted to cut your marketing budget during lockdowns?

Without marketing there are no leads and without leads there are no sales. It is extraordinary how often marketing budgets are cut when sales are drying up.

Do you have a joined-up marketing process? For something to happen, what needs to be done beforehand? How are enquiries generated? How are they followed up? 

Who does what? Do you have the right people? Do they have the relevant experience? Have they been trained? 

Are your marketing campaigns and initiatives proactive or reactive? 

Do you carry out market research? Do you monitor your competitors? 

While business may be at a low ebb due to the current efforts to control the spread of Coronavirus and roll out vaccines there are signs that cases of infections are beginning to reduce.

Businesses need to start preparing now for a new “normal”.

This article is an extract from our Board Briefing on sales and marketing for survival. 

You can download the sales and marketing board briefing here:

https://www.k2-partners.com/bb-sales-and-marketing-for-survival/

Categories
Business Development & Marketing Rescue, Restructuring & Recovery

Stronger together?

It is possible that merging with or acquiring a rival business may be the key to survival in the future.

A key issue a board needs to face in the current circumstances is to develop an M&A strategy for the business to address as appropriate both: 

  • Ensuring survival requirements, and 
  • Taking advantage of growth opportunities. 

The initial questions that need to be considered are:

  • What is our objective of the proposed merger / acquisition activity?
  • How are we going to identify appropriate targets and terms to meet these objectives? 
  • How are we going to manage the process?

You can find out more in our latest Board Briefing 👇🏻

Categories
County Court, Legal & Litigation Debt Collection & Credit Management

Bailiffs during Covid -19. You can’t make it up!

A 3rd generation run client operating from the retail and wholesale premises for almost 80 years and sells fresh goods to hotels and restaurants, was visited by bailiffs recently. 

It lost about 75% of its turnover in March last year when its wholesale customers closed due to lockdown. Since then, it has struggled on with its much smaller retail business.

Astonishingly, a high court enforcement officer on behalf of the local council attended the premises recently to recover an old and disputed business rates liability. No cameras were in tow although this particulate private contractor likes its status as defenders of claimants as victims.

The Enforcement Officer was adamant that they had the right to remove plant & equipment without regard for the 50+ company employees, nor for circumstances caused by Covid-10.

Intervention by the local MP was magnificent as she contacted the leader of the Council. However the Enforcement Officer was only persuaded to leave after seizing control of plant & equipment under a control agreement.

While our client survives to deal with their dispute over the claim, the whole episode had the attributes of a heist by gangsters, it was quite extraordinary.

Categories
General

How will you change your business post-lockdown?

Business life has without a doubt been unremittingly more difficult during the Coronavirus pandemic, not least due to the restrictions imposed by several lockdowns.


However, arguably, this has also been a learning experience for many with lessons that may be useful when things eventually return to “normal”.


Take this example from a survey by Deloitte which has found that one in four British employees could end up working from home. long-term.


It found that 97% of CFOs predict this outcome as companies make changes introduced during the pandemic permanent.


“By and large, this massive, forced experiment in home-working has been very successful. Sectors have been able to maintain quite a high degree of effectiveness operating from home,” said Ian Stewart, chief economist at Deloitte. 


However, this does not spell the end of the office, Mr Stewart continued, stating that people overwhelmingly want a combination of home and office work so they can continue to work with others. 

Categories
Banks, Lenders & Investors

Boards need investors who are willing to be patient and invest for the longer term

There are lessons for all businesses in this week’s collapse of Arcadia, albeit High Street Retail has had its own specific problems for many years in the shift in consumer habits to online retail spending.


All businesses need to be agile, aware of changes to their systems and processes not least from the growth in AI and technology.

They need boards with a wide range of expertise but equally importantly, they need investors who are willing to be patient and invest for the longer term.

What they do not need are owners/investors whose sole focus is to extract maximum profit as quickly as possible while taking little or no interest in the business’ development.

If you want investors who are willing to be engaged, to contribute both money and expertise for the longer term, why not contact K2.

Categories
Uncategorized

Tony Groom chairs the 2020 TRI conference

Today, our Partner Tony Groom Chaired the 2020 TRI conference.

In a central London studio, he hosted the live TV event, interviewing turnaround and restructuring professionals and moderating discussion panels throughout the day.

In a year where the industry has seen some of the most significant legislative and regulatory changes for decades, discussions throughout the day encompassed effects of the Corporate Insolvency and Governance Act, HMRC’s preferential creditor status in insolvencies, and the new mandatory requirement for independent scrutiny of pre-pack sales, where connected parties are involved.

Categories
Banks, Lenders & Investors Rescue, Restructuring & Recovery

Welcome relief for manufacturers uncertain about investing in new plant and machinery

A welcome relief for manufacturers uncertain about investing in new plant and machinery.

The Chancellor has confirmed the temporary £1m tax relief (up from £200k) on investments in plant and machinery has been extended by a year to January 2022. 

Recent announcements about restrictions continuing at the same time as those about vaccines give us hope but make it difficult to plan. While the timeline for resuming normality is unclear, what is clear is that business will continue. For this reason plans need to be made; the only question is when they should be implemented.

Such plans might include financial restructuring but should look to the future. No business can stand still, despite the current uncertainty. 

Is it better to take a chance on less than 100% certainty of an outcome than to wait for certainty? Traditional research and scenario modelling is useful heuristics can help. Our Board Briefing “Decision-Making in Times of Market and Economic Uncertainty” on the topic might be useful.

Categories
Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery

Will proposed relaxation of planning laws revitalise construction?

Last month the Government announced that it would enact legislation to relax planning laws so that full planning applications will not be required to demolish and rebuild unused buildings making it easy to convert commercial and retail properties into residential property. This could be the key to a swift revival of high streets and town centres by repurposing existing property.

If approved these new rules should come into effect in September.

The Government is also proposing to reform England’s planning system, it claims, “to deliver more high-quality, well-designed homes, and beautiful and greener communities for people to live in.” although the details have not yet been made public.

On the face of it, if the rule changes do become law this will be a significant boost to construction and building companies and suppliers, like us, of building materials.

Presumably, also, developers could benefit from a relaxation of the planning conditions that often accompany such projects, whereby local authorities can make planning consent conditional on the provision of a proportion of affordable housing or other community amenities via a Section 106 Agreement.

In answer to concerns raised by such bodies as the Council for the Protection of Rural England (CPRE) and the Local Government Association (LGA) that it will lead to a decline in standards, the Government has said that the measures are designed to cut out bureaucracy “to get Britain building” but will also protect high standards: “Developers will still need to adhere to building regulations.”

It has also pledged that pubs, libraries, village shops and other buildings essential to communities will not be covered by these new flexibilities. This will help avoid the decline of village and community life by preserving local amenities although most local libraries and many pubs have already closed.

Although a controversial initiative, we believe this would be a welcome boost for construction and associated industries and for employment through the jobs it will create. What do you think?

Has your business struggled as a result of the Coronavirus Pandemic? Are you having to consider redundancies as the Furlough measures are scaled down?  

Categories
Uncategorized

The 4-Part Single Sentence "Elevator Pitch" That Actually Works

Some are cheesy. Some are crass. Some are crazy.
But very few are compelling and convincing.

Until now…! elevator

You know the type of scenario.
You have only seconds to make that important impression.
And because they invariably ask you in that seemingly polite but disengaged way – because there are so many other people they do it with and vice-versa – you quickly feel uncomfortable because of the way they ask you and their matching facial expression.
Suddenly, before you’ve replied, your subconscious mind is telling you that what you’re about to say about you and your job is functional at best and most probably rather boring.
And their subsequent lack of any follow-up questions confirms their seeming indifference and your self-imposed insecurity.
Damned by your own description!
This self-imposed pressure is understandable, especially when you consider that when someone asks you what you do you have just seconds to grab their attention and, ideally, also their admiration…especially as they hear so many colourless answers to this often cold question.
So, if this situation haunts you and is even hurting your personal and professional brand every time you’re asked, then try this 4-step formula for describing what you do in just ONE sentence:
“At the heart of what I do is to help A who struggle with B to achieve C.”
 
The 4-part formula comprises:

  1. At the heart of…” gives your elevator pitch a more engaging sense of emotion so it has feeling rather than just being functional and factual.
  2. A is your ideal client.
  3. B is their biggest issue.
  4. C is their desired outcome or achievement)

So, for me, this would be something like:
At the heart of what I do is to help young business professionals who struggle with their true confidence skills to communicate compellingly to achieve greater pay increases, promotions and business sales.
But…it’s not just what you say. It’s the way you say it that’s also important.
Practise delivering this sentence into a mirror so you not only know how to adopt the right tone and cadence in your verbal delivery, but also how to adopt the right facial expression and vibe in your non-verbal delivery.
Why?
Because if you say something that sounds good but, facially, you look like you’re confessing to shoplifting, then it undermines your elevator pitch completely.
So, when you do utter your compellingly concise sentence, be positive, be punchy and then be profitable!
I’d love to hear your thoughts and feelings about this topic, as well as any results you get from applying this technique. Please look me up on Facebook, Twitter or LinkedIn. Thanks and enjoy!
You can also post comments on this page and join in the discussion!
Guest blogger: Sean Brickell find out more at https://life-impact.biz/

Categories
Banks, Lenders & Investors Finance General

Has what little trust we have in the banks been further eroded?

 
A guest post from Clive Pacey, Commercial finance broker CPCM Finance
This story is somewhat disturbing but would easily be dismissed if we felt that we could trust the banks and their cohorts in various professional services. Unfortunately I believe that that trust has broken down
The accusation is that Allder King worked with Lloyds Bank to “undervalue” various properties held by  certain borrowers who had particularly good low cost pre 2008 deals. The effect of this was to breach the loan covenant and effectively send the business to the wall. True or not? Well Allder King have been cleared by their institute and Lloyds have stated the claims are “baseless” to which one might say,  they would do that and they would say that, wouldn’t they?
I actually believe that this is probably quite a straightforward case to judge and I suspect the detail will be outed soon enough. Undervaluing properties is surely not difficult to pinpoint.
I would also like to believe that this accusation is unfounded and the industry can breath easy. In fact I  wish I could make that assumption and certainly it is no reflection of Lloyds in isolation that I cannot. But the fact is that I feel uneasy
The relationships between many lenders and “professionals” is very unhealthy. There is an often an attitude that businesses are cash cows to rip fees out of regardless of the consequences. There is also too frequently an underlying contempt for businesses and their issues and this is somewhat ironic coming from a sector which is, to put it politely is not held in great esteem
Many business owners are rightly suspicious of the “men in suits” that appear to be  just a little too friendly with each other and give the impression of being “a mafia”, as one client of mine put it. Their concerns are not always unfounded with reciprocal passing around of sometimes unnecessary work not unheard of. During my time, drinks have loosened tongues at various events and I have certainly not been impressed by some of what we I have heard
My view on this is clear. I believe that if bankers have experience of the real world and an understanding of what it takes to commit to an enterprise, then there may just be a little more respect. Certainly if the Allder king story does stand up, then contempt rather than respect is the word that springs to mind. Often though this is pure laziness with both the “professionals” and bankers too often working in a bubble
Perhaps unusually in the finance brokering world, I am not from a banking background but do have extensive experience on the “other side of the fence” in sectors such as music, advertising and manufacturing. I believe I have empathy and certainly respect for those that struggle and commit to build a business from scratch. Certainly more respect than I could hold for those bailed out after making catastrophic mistakes which were borderline criminality
Which perhaps brings me back to the above case. I cannot call the judgement and the finer points of the law in this case are not my specialist area but the very fact that these alleged cynical practices do not come as a surprise, is the biggest issue of all
http://cpcmcredit.wordpress.com/
http://www.cpcmcredit.co.uk