Looking at having to wind up my business

[Desticado]

Hi there.
Great place for information, real shame I never found it before.

I own/run a small ltd company which is unfortutately running into significant cashflow problems.

We currently owe our key supplier approx £18k with stock of approx £10k and outstanding invoices for approx £6k. Furthermore we are currently £15k overdrawn on a £20k facility (for which im personally liable) with company credit cards with about £4k owing on them.

I've been struggling to turn it around for some time but feel the writing is on the wall.

I've asked my accountant for help and a week on im still waiting for his advice... Have used three accountants in 6 years and have yet to find one that actually gave advice other than just telling me to give them more info for a return.

My company return for the last tax year is due, along with my VAT return at the end of the month...

Can anyone point me along an innitial course of action and/or reccommend an Isolvency practictioner in mid-east kent I could talk with.

Thanks.

 

[duongo]

Gosh, sounds aweful. What is your business?

 

[KM-Tiger]

I would recommend against talking to an insolvency practitioner until you are certain that is the best and only course of action. An accountant is better placed to advise you on all the possibilities.

The major problem is accountants and January, most are rushed off their feet, which will be why you are waiting for yours.

There is a Maidstone accountant who posts here regularly. Hang on a short while and see if he picks this up.

 

[Alice3537]

Sorry to hear about your situation, Desticado.

It may be an idea for you to post on the Accounts & Finance section of the forum as well to see if you get responses there.

(Edit - as Kent Manufacturer said! )

 

[INDIZINE]

Unfortunately many accountants can only advice you financially how to tread, not how to turn the business around and out of the gutter its fallen into. I feel for you, wish we could provice some guidance to help you give it one last go but neither do we want you to go further into debt, as I am sure you have already tried your best. Maybe you can help others avoid the pitfalls.

 

[Alice3537]

I agree with Indizine and would also add that I would not advise at all on the basis that there is so little information offered in the initial post (no disrespect to Desticado, who gave a good summary of the overall situation) I don't think any real assistance could be offered other than generic advice which may or may not be of assistance.

 

[KM-Tiger]

It may be an idea for you to post on the Accounts & Finance section of the forum as well to see if you get responses there.

(Edit - as Kent Manufacturer said! )

No, you are right. I've asked the mods to move this.

 

[Desticado]

Thanks for all the responses so far. REALLY wish i'd found this site many years back.

I had originally intended to post in the 'finance' section but mis-posted it here.

Im currently looking to realise some assets the business has (van, IT equipment etc) that are not really needed. Also putting some 'SALE' signs up to try and clear some of the stock to get some cash in.

 

[Alice3537]

To be honest, I think there is a place for the thread in both forums - issues overlap and you'll find that some people will read one section of the site more than another.

 

[Desticado]

snip---I would not advise at all on the basis that there is so little information offered in the initial post (no disrespect to Desticado, who gave a good summary of the overall situation)---snip

Thanks for the response.
What other information do you think I should add?

Its not a great situation and cant begin the explain the angst and difficulty combined with the fact i've poured so much of my own finances into trying to make it work over the last few years and now have to try and act quick so as to not too adversly affect my personal finances which are all tied up with it as I now obviously have no income either...

 

[KM-Tiger]

I wouldn't add any information at the moment. In my view you need detailed advice from a good accountant, who will not only explain the options for your business, but also help you to deal with any current crises.

If it's any consolation I've been up against the wall, and like you, thought insolvency was the only way out. It's not a nice feeling and you have my sympathy. My accountant was able to show me a different route, otherwise I wouldn't be posting this now. Not saying that's true for you, but you must somehow or the other find out.

 

[Alice3537]

Thanks for the response.
What other information do you think I should add?

Its not a great situation and cant begin the explain the angst and difficulty combined with the fact i've poured so much of my own finances into trying to make it work over the last few years and now have to try and act quick so as to not too adversly affect my personal finances which are all tied up with it as I now obviously have no income either...

There are a number of things I would want to know - including what you 'do' (very important!), whether you are selling or offering a service to the public or B2B, on-line or bricks and mortar, length of time trading, experience, retailing or not, how many clients or customers etc etc - BUT I agree with KM that you do not need to expand on things at this time - see if anyone can point you in the right direction first.

 

[Desticado]

mainly service with some retailing covering a range of IT support areas for individuals and small businesses.

 

[Richie N]

Have you thought about factoring and releasing cash against your outstanding invoices?

 

[Desticado]

Have been advised that except in specific situations that is generally a very slippery slope to go down.

Besides part of my wanting to act now is to take whatever steps I can to reduce my own personal liability. I lose no matter what but would prefer to only lose a few thousand not 20-30 thousand and with no immediate sign of turnaround need to take some steps to minimise that whilst still trading.

 

[KM-Tiger]

Do you have ongoing contracts/customers?

 

[Alice3537]

Factoring may only be of use if you have a small number of suppliers who create most of your T/O - if it tends to be small accounts or one-off users of the service it would be better to tighten up on credit control and get the rottweiler in the family to help out!

Factoring or invoice discounting can be of use in the right circumstances. If the circumstances aren't right, they're as useful as I am!!

 

[Desticado]

Majority of our clients or one offs/low frequency and low value (<£100) receipts. Have a few ongoing/regular clients who spend more with us.

Thanks again for taking time to read the thread and the time to contribute.

 

[Alice3537]

Majority of our clients or one offs/low frequency and low value (<£100) receipts. Have a few ongoing/regular clients who spend more with us.

Thanks again for taking time to read the thread and the time to contribute.

Receipts are up-front, then I assume?

 

[Desticado]

Smaller receipts are upfront, larger jobs are invoiced.

 

[Alice3537]

You really need to find a specialist, I'm afraid.

I really do wish you the best of luck - and never forget that what doesn't destroy us makes us stronger/ failure is sometimes the best option and STILL makes you stronger/ you learn from your mistakes and that breeds success (I'll stop before the phoenix rising from the ashes stuff!!!!).

Best of luck to you. Stay around and we'll help/listen/be a shoulder to cry on (within limits, of course!! )

 

[Desticado]

snip----You really need to find a specialist---snip

yes, was part of my original post.
Hopefully someone will be able to reccommend one in Kent.

 

[Kent Accountant]

I have sent you a PM

 

[Desticado]

Thanks.
Very useful, I'll follow it up tommorrow.

 

[rjharrison]

Besides part of my wanting to act now is to take whatever steps I can to reduce my own personal liability. I lose no matter what but would prefer to only lose a few thousand not 20-30 thousand and with no immediate sign of turnaround need to take some steps to minimise that whilst still trading.

You need to be very careful about how you treat the debts: if you give your bank debt preferential treatment (because it's effectively your personal debt) then your creditors could/would get very pissed off.

There could be legal consequences for you

 

[Cornish Steve]

Im currently looking to realise some assets the business has (van, IT equipment etc) that are not really needed. Also putting some 'SALE' signs up to try and clear some of the stock to get some cash in.

That's a good idea. One of the common reasons for cash flow problems is too much inventory. The temptation is to hold on to stock thinking you can shift it in the future, but this doesn't help. Also, take a hard look at each part of your business and cut out the unprofitable. By focussing on one or two things instead of several, you may find the greater focus leads to unexpected growth in an area you were overlooking.

Have you contacted your suppliers to ask for help? You may find that some are willing to give you a little more time to pay. That could make a bit of a difference. Also, are you putting pressure on your customers to pay up? Collections is crucial for you right now. For new customers, offer them a reason to pay you up front (e.g., 10% discount). A bird in the hand and all that.

Now is not the time to be hesitant, but it is the time for advice. Yes, pester the accountant to get back to you.

 

[Ian J]

Have been advised that except in specific situations that is generally a very slippery slope to go down.

As a specialist factoring broker I come across many people who are happy to advise others that "factoring is a slippery slope" without really knowing what they are talking about but must admit that one of the few instances where I would not recommend factoring is in an instance like yours where the company is loss making with little prospect of turning it round.

 

[DFL]

I have only browsed quickly through this thread due to heavy workload but a few initial thoughts...apologies in advance for grammar and spelling!

Speak to your key supplier and see what they can do for you - try and agree a repayment schedule that is acceptable to you both. If agreed, stick to it as they will deserve it.

Stock - Consider JIT (just in time) stock control. Use one or two reliable suppliers and negotiate price with them for loyalty. If you want to compare prices then use my supplier for a few quotes.

You have used three accountants in six years. Why? Are you realistic in your expectations? Do you agree scope of work and mutual obligations from the outset? Do you do you research on them beofre entering into the contract? Choosing the right accountant for your business is one of the most important decisions that you make, anyone can choose the wrong one but three times may be more than coincidence. Be as self critical as you can and ask yourself if you give these type of decisions the time and consideration they deserve.

IT support - cut out the loss making activities. Do you do PC repair? Total waste of time unless client agrees to be billed by the hour, which is rare. Jobs like these can take hours and hours and no one wants to pay more thsn £100 to repair something which they cna replace for a couple of hundred more.

Concentrate on less of the one off small jobs and start making more of the larger ongoing work type client that you have. You will need to realign your marketing strategy and you can do this in a variety of ways without spending money. Start with these existing client type and see what else you can offer them. Then use imagination. Develop strategic relationships with banks, accountants, printers etc and get a cross referral system in place. Contact similar business and offer outsourcing help. Walk into every business in your area if you have to and offer your expertise.

Agree with Richard re preferential debts - will be redistributed in the event of liquidation.

Couple of questions:

Are you paying yourself in the most tax efficient manner?

Are there unnecssary costs that you can cut?

Has the business been profitable in previous years?

Are your prices high enough?

Do you still enjoy the business?

 

[DFL]

Couple of other thoughts,

1. Your credit management may need review, whats a breakdown of the 6k? I disagree with advice to discount to get paid, you can't afford it, instead I would start threatening to charge interest that usually does the trick. Then going forward, ensure that you have the right system in place so that late payment and bad debts are a thing of the past.

2. Any accountant that doesnt respond in one week to a business in crisis should have a very good excuse for not getting on the case straight away, peak time of year or not. I would recommend that you find out why and if not satisifed move immediately to someone who will do more than purely compliance work.

 

[Desticado]

1st accountant was really just a bookkeeper. used him for 2 years.
Then switched to a larger chartered firm locally. They made what I felt was a major flaw and all their fault for my 2nd personal tax return which led to me being fined having to pay additional tax and their fees to sort out the mess to add insult to injury.
After that was resolved I moved to another company (my current accountant), who experience has shown to be more talk than substance unfortunately.

My credit from clients should be cleared into my account within the next couple of weeks.

as an aside on top of this I have an outstanding invoice with a 'debt management company' I did some work for locally who owes me £2k. Knowing his history i've not taken it to court as I could just see him tying me up with more and more legal costs.

 

[InsolXpert]

Hi there.
Great place for information, real shame I never found it before.

I own/run a small ltd company which is unfortutately running into significant cashflow problems.

We currently owe our key supplier approx £18k with stock of approx £10k and outstanding invoices for approx £6k. Furthermore we are currently £15k overdrawn on a £20k facility (for which im personally liable) with company credit cards with about £4k owing on them.

I've been struggling to turn it around for some time but feel the writing is on the wall.

I've asked my accountant for help and a week on im still waiting for his advice... Have used three accountants in 6 years and have yet to find one that actually gave advice other than just telling me to give them more info for a return.

My company return for the last tax year is due, along with my VAT return at the end of the month...

Can anyone point me along an innitial course of action and/or reccommend an Isolvency practictioner in mid-east kent I could talk with.

Thanks.

Hi...may be I can give you some useful advice...

Your company's current financial position is as follows: -

Assets: Book Value/£ Estimated to Realise/£ (say)
Stock 10k 7k
Debtors 6k 4k
16k 11k
Liabilities:
Creditors (18k) (18k)
Bank (15k) (15k)
Credit Card (4k) (4k)
____
Deficiency (21k) (26k)

Assuming:
You don't have any other company assets.
Your crown liabilities are included in the above creditor figure.
Your company is loss-making.
----
It is clear that your company is 'insolvent' in terms of balance sheet. You suggested that your company is struggling to pay its debts as and when they fall due...hence, insolvent in terms of cash flow too.

Your company has outstanding crown liabilities...I assume that your company will not be able to meet these tax obligations too.

In my opinion...

...you, as a director of the company, should take steps to cease trading....to avoid claim of wrongful trading being made against you in the event of insolvent liquidation.

Limited liability will protect you from company debts other than the personal guarantee. The bank effectively has security over the assets of the company. The bank will have priority over unsecured creditors in liquidation.

You should try to maxmise the assets realisation as any monies raised would be used to pay-off your bank first (who normally have a fixed and floating charge over the assets of the company). Thus, reduce your personal liability.

You will still be personally liable for any shortfall to the bank under the personal guarantee.

I will need more detail to give you proper advice. However, based on the your initial information, I do believe that creditors' voluntary liquidation is the most appropriate option for your company.

 

[business-savy]

In order to properly wind up a company prompt, complete and somewhat cunning approach is required.

Whilst forcing a debtor company to be wound up I came across the legal point blog which greatly assisted.