There is little doubt that the events of the last two years, paired with the current cost of living crisis, have caused financial issues for businesses across all sectors. According to Gov.UK, the number of individual insolvencies between January and March of this year (Q1) was 17% higher than Q4 of 2021.
For businesses facing financial difficulty, we’ve put together some steps on how to help improve cash flow and seek advice to help stay afloat and reduce the possibility of insolvency happening.
Fail to prepare, prepare to fail
One of the most valuable steps to take if your business is on the brink of insolvency is to plan your next steps. Whilst it may seem easier said than done, when managing financial issues, it’s more important than ever not to rush into rash decisions or make choices based on ease.
Although you should already have a business plan in place when starting a business or beginning a new financial year, making a new plan as soon as these issues start appearing will help you in the long run.
Depending on your situation, your plan may span over a whole year, six months or even just a few weeks. When creating your plan, be realistic about your current situation and where you predict you will be in the near future. Ensure the targets you set are realistic and create a clear plan indicating how you will achieve them.
Make use of available support
Although financial difficulties in your business may negatively affect your mental health, be reassured that plenty of resources and schemes are available for support. If required, you can access free business debt advice online, and many charities are set up with professional advisers who can help you including Business Debtline, Money Advice Trust and Gov.UK. You can also seek professional guidance from your accountant, an IP or restructuring firm, but ensure initial calls are free and no obligation.
With the after-effects of the pandemic and the current cost of living crisis, schemes have been created to support struggling small businesses. While signing up and joining these schemes immediately may be tempting, you should consider your options and ensure that these schemes are beneficial to your company and will not cause further issues down the road when they must be repaid.
Chase outstanding debts
Your business’s finances can appear much worse than they are, especially if you are not taking into account any outstanding debts or payments you are owed.
This can vary depending on your business type and operations. For example, if your business is in the construction or manufacturing sector, your income may be spread out due to larger ongoing projects. This can make it harder to understand your current financial situation clearly.
Reviewing and including all outstanding payments may help to reduce the debt you’re facing and could protect your business from insolvency altogether.
Reduce Operational Costs
Whilst insolvency can be caused by a lack of money coming into your business, limiting expenses going out could be beneficial. Likewise, look into any fixed costs your company has such as outsourcing services that could be done in-house or paying for rental equipment and think about purchasing low-cost secondhand machinery and equipment instead.
With the rise of working from home, office space can also be an area for considerable savings. Selling surplus equipment and downsizing your business could not only be a great solution for additional funds but may also help your business run more efficiently.
Moreover, if necessary, internal costs can also be limited, such as staff perks or outsourcing costly business processes or services.
Sell surplus assets
If you’re facing insolvency or struggling with finances, a solution could be right under your nose! Selling unused or unwanted equipment could be an easy solution to free up some additional funds. Whether it’s equipment that isn’t being used or tools and machinery that are now outdated, auctioning these items can quickly get you the vital funds you need and clear up space around your business premises.
Not only can auctions be beneficial for selling goods, but also purchasing equipment second-hand instead of new can cut your spending extensively.
If you require additional costs fast and have equipment, tools or machinery you’re looking to sell, our bespoke disposal solution can support you regardless of your business size or situation. Our clients benefit from unrivalled turnaround times, free marketing strategy & specialist account managers within your market sector. Contact our friendly professionals today to find out how we can help you!
Alternatively, if you’re looking to reduce your spending on goods, check out our current available auctions here.