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Neil O’Callaghan, a Partner at Machins solicitors, gives his top tips
for keeping businesses afloat. Neil, who heads up the Commercial Litigation
team, is considered one of the leading insolvency lawyers in the
Herts/Beds/Bucks region.
Neil frequently advises insolvency practitioners, companies, directors and
individuals on insolvency matters. Neil’s vast expertise also includes cases
ranging from international aviation to standard debt collection.
1. Have a clear strategy
All companies should have a clear business strategy at all times. However, when
times are good and people are busy ‘making money’ this often gets overlooked.
In a downturn however, it is essential to have a clear strategy to help deal
with the challenges facing your business.
2. Have key information to hand
It is imperative that you actually know how your business is performing. You
should have monthly accounts showing how well key indicators are doing such as
cash-flow, creditors, debtors, invoicing target etc. However, do not rely
purely on this information. It is important that during the month, regular
reports are made available to key management staff.
3. Have goals and targets
There is no point in having the key information if you do not know what your
targets are, what you are aiming for or even what you need to achieve to
survive. Therefore, work out where you need to be each month by setting clear
goals.
4. Improving cash flow
Although this is in every ‘how to survive the recession’ list you will read,
it is probably the most important. Most businesses that fail do so, not because
they are a bad business, but due to lack of liquidity. Press hard for payment.
You should not allow customers to take advantage of extended terms of credit.
If you agree terms of credit, have an interest penalty for late payment.
If the business relationship allows, use appropriate enforcement techniques to
recover payment. It is often said those that shout loudest will receive payment
first. In my experience, this is certainly true. If your customer is struggling,
make sure that you are at the top of the list to be paid.
Do not send out the traditional statements showing number of days from invoice
being 30,60,90 days overdue because that suggests to customers that they can
have more days than agreed.
Remember cash is king and cash management is queen!
5. Ask for help before it is too late
Always keep your bank informed of your current position. Do not think that if they do not know about problems you are better off because in most cases, that is not true. Most insolvency practitioners ideally would frequently say that by the time they have been called into the business, it is often too late to turn the company around and save it. It is a question of managing the closure of the business. They often feel frustrated that if only they had been contacted six months earlier, they could, with a few changes, have saved the business.
6. Take advantage of business opportunities
A recession will create a number of opportunities for you to take advantage of. Competitors will fail and allow you to move into their market. Also, potential customers may possibly be looking for different criteria from their suppliers in these times and you should position yourself ready to take advantage of this. Administrators often sell the assets of a company by an agreement which was actually reached prior to the administration. If you are looking to buy assets, speak to insolvency practitioners to see if there may be opportunities for you in this regard. In summary, I would suggest that the key is to:
For further information, contact Neil O’Callaghan at Machins.
(April 2009)
