ADVERTISING FEATURE
HELPING BUSINESSES THROUGH TRICKY TIMES
Dan James is Partner in the Business Recovery and Insolvency Team at Albert Goodman . Working across the South West , Dan is a Licenced Insolvency Practitioner with over 20 years ’ experience in helping companies and individuals in financial difficulty .
Dan networks hard to build relationships with business owners and directors in our community . His aim is to be the first port of call at the first sign of company financial distress , as in Dan ’ s words , “ prompt action promotes financial recovery , saves businesses and saves jobs .”
In October , The Insolvency Service released its statistics for 1st July to 3rd September 2023 . The stats have been deemed as the worst since 2009 . We met Dan to find out what ’ s happening on the ground in our area and what he ’ s been doing to help .
Does your experience this year echo The Insolvency Service stats ? We ’ ve been busier over the last 12-18 months . Our formal appointments have gone up by over a third , but I don ’ t feel this is a true impression of what ’ s going on as the numbers have risen from a relatively low base due to Covid . Many businesses survived that period with the support that was available at the time and we ’ re seeing the fall out now . With interest rate and inflation rises , you would expect the numbers to rise as well , as the economy has been used to them being low since the financial crisis .
We are also seeing a large number of firms which are just looking to wind down their business and solvently exit , tax efficiently , through a Members Voluntary Liquidation ( which do not form part of the insolvency figures ). For example , we are seeing a rise in consultancy businesses shutting down and taking full time employment instead as they ’ re keen to find stability . Some of this is due to the IR35 rules but equally job security is becoming the driver .
Is high inflation and lack of Government support responsible for a rise in insolvencies ? We are now seeing rising costs being more of a factor on why businesses can no longer make the profits they were making before . We ’ re seeing businesses winning work with a healthy pipeline but running out of profit quickly due to overrunning costs .
The manufacturing , construction and design and build industries are being hit particularly hard by this . Many have entered into tenders for jobs , won them and then soon watched costs spiral once they ’ ve got started . It can only take two or three projects to make a loss for it to have an ongoing effect on cashflow . It creates a ripple effect and makes the cashflow and overall profitability difficult to manage .
How often does late payment culture play its part in all this ? A lot of companies that we see will have significantly late payers . We ’ ve just seen the liquidation of a print business where they were owed £ 50- £ 60k from a very large firm , and some of those invoices were outstanding since 2017 .
Stats came out recently which showed most SMEs have at least £ 27k worth of bad debt sat on their ledger at the moment and one sixth of invoices are paid late .
It ’ s definitely prudent to look at financial health of both your customer and supplier list on a regular basis , just to make sure you keep on top of any potential warning signs .
What lifelines are available for organisations in distress ? Getting advice is probably the first lifeline . Talking to your accountant , solicitor or someone like myself helps clarify the situation and what is needed in the circumstances . It also shows that you are taking your director duties seriously .
If there is a viable business , we would want to take every step we possibly could to keep it as a going concern . It may need some refinance , or perhaps some more careful cash management , or negotiation with certain suppliers . Suppliers and creditors are often supportive if you open up dialogue with them and formulate a plan . Communication is key .
“ A recent review looking at pricing showed that the price increase required ( to break even ) was 45 % due to increased energy and logistical costs .”
How have you been supporting businesses this year ? We recently helped a joinery business which had been trading for nearly 40 years . The directors approached us last year with severe cash flow problems . We worked with the business for several months to turn things round , improve the cash flow , reduce the liabilities and find a buyer to take the business forward . The business sale saved the jobs of seven highly skilled employees and allowed the business owners to retire .
Another example would be the recent solvent wind down of a local airfield . The owners sold the business and wanted to extract the remaining funds in the most tax efficient manner . We worked with the solicitors immediately following the sale and the company ’ s accountants to finalise the company ’ s accounts in order to place the company into a solvent liquidation . The liquidation allowed for an immediate distribution to the shareholders and we are also requesting a significant prompt payment discount from HM Revenue & Customs ( by carefully timing the company ’ s final tax payment ).
What do you think the outlook is for 2024 ? I think there ’ s still going to be an element of a Covid hangover . I expect that there will be further distressed businesses in the new year , but I ’ m also quite optimistic that things will start to turn a corner as the year progresses .
If you could offer three top tips to stay on top of business health , what would they be ?
1 . Keep a careful eye on cashflow and review your debtors regularly . Working with larger clients is great for the future growth of your business , as long as they pay you within your terms . Explain that if they break your payment terms you will escalate collection procedures quickly if necessary . It will show your client that you are professional and you have robust collection procedures . Don ’ t be scared – your cash needs to be in your pocket .
2 . Look at any rising costs and think about raising your prices ( immediately ). The longer you leave it the more your profit margins will suffer . A recent review looking at pricing showed that the price increase required ( to break even ) was 45 % due to increased energy and logistical costs . Inflation and prices may be starting to come down , but if you haven ’ t had that type of review or conversation with your accountant , then do that straight away . If your immediate offering is not profitable , you ’ ll run out of cash sooner than you think .
3 . Don ’ t underestimate HMRC . HMRC have been extremely lenient in recent years due to Covid , but HMRC have now woken up and have realised that they need to collect the backlog of taxes due . They may soon lose patience and commence winding up proceedings if you fail to keep them on track . HMRC winding up petitions are back on the rise , so if you get behind , seek professional advice and communicate with HMRC to come up with a repayment plan .
Dan works with a number of accountants , solicitors and banks , who all look to add value to their client relationships , expand their range of services and help their clients .
He is licensed by the Institute of Chartered Accountants in England and Wales ( ICAEW ) and is also a member of R3 , the UK ’ s trade association for Business Recovery Professionals .
To get in touch with Dan email : dan . james @ albertgoodman . co . uk or call 0773 635 4704
24 www . tbebathandsomerset . co . uk