Small business in trouble - investment - Your views on this please

[Wowee]

I know of a business who are in BIG cashflow trouble ATM, mainly due to directors extravagance, (not all of them, but 3 out of 4).

I'm working with them on bookkeeping, & advice on day-to-day admin, trying to keep the business going, getting money in, & stopping the directors spending it (hard job).

They have found an investor who is willing to put money in. If he does, it would make him a (I think THE) major shareholder, although I don't think he would actively participate. I think this may cause boardroom difficulties as the investor is a relative of one director. There is already tension between the directors,

I have been asked my opinion by the directors.

The investment would get them out of an immediate hole, but may well just fuel the current fire.

If it was the investor who had asked me, I'd tell him he was loopy, "leave it in the bank son".

I'm thinking of telling them to get everything else in order before accepting any outside investment (which I think is possible, if everyone stops behaving like a p*ll*ck).

Just interested to find out what others think.

[Jon236]

If possible I'd advise on some conditions regarding the investment. Ie, all expenditure by company directors over a set sum (say £100 for arguments sake) should be signed off my all directors for a fixed period until the company is solvent again, to try avoid extravagant expenditure.

[Wowee]

Jon, thats a good idea, thanks.

I have confiscated the debit card which had been issued for the business account, which one of the directors would use to fill up his car, draw spending money from the account, pay for restaurant meals & hotels, that sort of thing, often forgetting to get a receipt.

Several thou went that way prior to my involvement.

[Jon236]

Jon, thats a good idea, thanks.

I have confiscated the debit card which had been issued for the business account, which one of the directors would use to fill up his car, draw spending money from the account, pay for restaurant meals & hotels, that sort of thing, often forgetting to get a receipt.

Several thou went that way prior to my involvement.

:eek::eek::eek::eek::eek: sounds like some creative accounting is needed to keep track of all that!!

[Wowee]

:eek::eek::eek::eek::eek::eek: Indeed. some 'missing invoices' turned up when i did the first VAT return, which one of the directors 'found' after I told him what their VAT liability would be.

I am however, quite concerned about this situation as I believe one of the directors is seriously unethical, possibly worse, which threatens my professional integrity.

Today that director has chastised me for discussing company finances with another director 'behind his back' . I had answered a straightforward question regarding VAT.

[jiggssey]

Sounds to me like you need to walk away. There's more important things going in and can be going on without having to tidy up someone else's mess. Your in a no-win situation. If it's a great business idea/potential go after it yourself and do it properly.

Good Luck with your decision.

Jigger:)

[David Griffiths]

It seems to me that the investor is perhaps not investing on a rational basis. (That's a euphemism for an idiot)

Putting money into a small business is all about backing the people concerned. They've already shown that they can't run the business, and you suspect that some are "ethically challenged" (That's a euphemism for crooks)

Sounds to me like a recipe for an immediate and permanent exit - the proverbial trail of dust over the hills and far away.

[TotallySport]

or put your fee up!!

[Pipster]

Wowee, i think your fantastic, you seem to be keeping a cool head and i only wish i could afford to have some one like in my business. It's really hard trying to keep on top of all the books especially if not much good with money. This is my problem i'm having to be very strict with myself. I really need to get to grips with my cash flow too.

Just managed to get my head around my VAT returns, and accountants charge a lot of money for advice. I know the VAT people are helpful but they just don't seem to explain things the same way as my accountant although 4 ten or so minute conversions and a little bits of checking my first VAT return which took all of an hour is costing me £450 including VAT. - Sorry gone off the subject.

I'm sure you'll sort something out it sounds to me as you have your head screwed on right!

[David Griffiths]

Just managed to get my head around my VAT returns, and accountants charge a lot of money for advice. I know the VAT people are helpful but they just don't seem to explain things the same way as my accountant although 4 ten or so minute conversions and a little bits of checking my first VAT return which took all of an hour is costing me £450 including VAT. - Sorry gone off the subject.


That's either VERY expensive or there's a lot more involved that your summary. Perhaps there's other work involved in setting up your new business, for example.

We probably charge more than many of the accountants on here, and wouldn't get anywhere near that for the work that you've mentioned.

Prices do vary with location and the size of the firm but you are entitled to clear billing for the work done, so that you can understand it.

[Wowee]

Sounds to me like you need to walk away. There's more important things going in and can be going on without having to tidy up someone else's mess. Your in a no-win situation.

Sounds to me like a recipe for an immediate and permanent exit - the proverbial trail of dust over the hills and far away.

Oh I absolutely agree, and that's what I intend to do, just as soon as they have money in the bank to pay my January invoice. I'm determined to get that first.

[Pipster]

Thanks for that advice david, i know the bill doesn't include any start up costs cause i paid for them back in september that cost me £815 in total. And i did get broken down bill, i shall ask my accountant to provide me with this. I felt it was a lot of money for little work and now i can see that this may be the case. My accountant is a nice man, but i don't want to blinded by that.