Tag Archive: debt

  1. Can You Have Your Cake & Eat It?

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    Patisserie Valerie is another case of corporate insolvencies continuing at a pace but do we all really know what they mean to us and our businesses.

     

    When dealing with companies there are two main types of insolvency – Administration and Liquidation.

     

     

    The simplest way to explain the difference is that:

    • Liquidation is not good,
    • Administration is better but still not great.

     

    Lets look at an example

    Patisserie Valerie- They entered Administration.

    This means that a third party will take over the running of the company, usually an Insolvency Practitioner (IP) or an Accountant with a view to finding a buyer for the company as a whole, or continuing to run it as a going concern..

     

    Deals are often made with the creditors of the business. They’ll offer people who are owed money say 40p in every £ owed, to reduce the liabilities of the business and to make it a more attractive proposition to buyers.

     

    For the established high street names Administration is the preferred option, so that the company can continue to run. The brand name continues and there is a possibility that some, if not most of the staff can keep their jobs.

     

    Successful Administration

    One such example of a ‘successful’ administration is HMV.

    • This is a high street name needing support to find a buyer and retain goodwill rather than close.
    • Administration was the preferred option.
    • Thankfully a buyer was found for HMV and the majority of the stores will remain open, safeguarding several thousand jobs.

     

    What if there wasn’t a buyer?

    If a buyer could not be found, or the company is found not to be a viable option for continued trade, as in the case of Carillion, then the company may enter Liquidation.

     

    Liquidation

    This is where a Liquidator or IP will affect a ‘fire sale’ of the company’s best assets such as:

    • stock,
    • order book,
    • machinery
    • plant

    Monies raised are to pay its creditors. However, because the company has closed and the brand no longer trades, there is no future revenue and the staff will unfortunately lose their jobs.

     

    In Summary

    Should you suffer the pain of having a company enter insolvency, then your best hope for a positive outcome is if it goes into administration. In which case you should always lodge your claim with the IP, as there is a chance that you could get paid a creditor’s dividend, or some pence in the pound against what you’re owed.

     

    If the outcome is liquidation, again lodge your claim with the IP but be aware that any dividend will only come about from the sale of assests and this is solely in the hands of the IP. So no guarantees, no timescales and less chance of a positive outcome.

     

    Remember,  there are ways and means of limiting your exposure to the risk and pain of bad debts and insolvencies. If you would like to discuss these options, please feel free to contact us as well as reading more of our blogs

  2. High street misery, Brexit…How can you manage the affect on your business?

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    Let’s make no bones about it, the next few months are a period of uncertainty for all of us.

    Brexit is finally happening!  Judging by the noises coming out of parliament, the deal is not going to be to everybody’s taste.

     

     

    The High Street is in a state of disrepair, both physically and metaphorically. A recent ……. survey claimed that inner city retail outlets were closing at a rate of 14 a day !

     

    Now more than ever is the time for you to know who you are dealing with. Also just as importantly who they are dealing with ?

     

    On face value, you may not have a direct dealing with an import or export company, or indeed that of a High Street retailer but it is imperative that you start to trace the business path.

     

    Christmas gives everybody a great opportunity to speak with your customers. Whilst you are speaking to them to wish them well for the festive season, ask them the questions that will give you the information you need to make some measured judgements.

    Examples:

     

    “I know a little bit about your business but please tell me briefly, who are your major customers,

    what type of clients are you looking to attract and are there any particular industries ?”

     

    “We were having a discussion here the other day about whether Brexit will affect us, do you think it

    will affect your business in any way ?”

     

    “What’s your thoughts on the current state of the retail industry, do you think it will

    have any bearing on businesses like your and ours ?”

     

    You’re trying to ascertain whether at some point in the future, your customers will be affected by the uncertainty to come.

    • Will Brexit impact their costs or margins ?
    • Will the reduction in High Street trade reduce their revenues and cash flow ?

     

    Remember, 8 times out of 10, a debtor is only a debtor by circumstance. Something has impacted upon their money chain. A major customer has gone bust or a supplier is delaying goods for sale. This impacts on their revenue and cash flow. Often your customer has no other choice than to pass this pain further down the money chain.  Including delaying payments to their creditors whilst they resolve things.

     

    The more informed you are about your client’s exposure and risks, the more able you are to identify changes in trading patterns and payment schedules. This will then enable you to  react faster, when taking actions to ensure your cash flow is not the one that is affected.

     

    Christmas may well be the season of good will but it must also be the season of good practice.

     

    We are here to help. So if you would like to get our advice or use our services please get in touch>>>