Communication key for firms facing temporary cash-flow difficulties

Investment: Issues may arise as more companies set up in area

Dundee’s waterfront regeneration project is well under way.

As a consequence we have seen an influx of developers, investors and businesses, particularly in the hospitality industry, seeking to locate in the city and surrounding area to reap the rewards that the regeneration scheme will hopefully bring.

Visitor numbers are anticipated to markedly increase, and new restaurants, bars and cafés will strive to take advantage of the city’s up-andcoming success.

However, those involved in the hospitality industry are only too well aware that trading can be very challenging, at times leading to strained cash flow and discontented suppliers.

Having advised a range of commercial enterprises over many years I consistently encounter those in the food and drink sector, including suppliers to the sector, experiencing trading difficulties to a greater or lesser extent.

Common themes fundamental to almost every debt-based dispute that crosses my desk are failure of the parties to communicate with each other, and a persistent failure on the part of the debtor to deal with financial difficulty such that formal legal processes become inevitable.

At its most extreme, a disenchanted creditor who is simply unable to engage in a dialogue with a customer who has buried his head in the sand might well start unannounced insolvency proceedings at a time which will have maximum impact, for example just prior to Christmas – the busiest time of year.

Such a course of action can result in the debtor’s business having to close its doors with immediate effect, with significant loss of income, loss of staff and reputation, and with additional expense being required to unpick that sequence of events.

The best advice I can give to a business hoping to trade through cash-flow difficulties is to maintain an open, honest and regular dialogue with creditors to build confidence and ensure enforcement measures are not taken without warning.

Do not give commitments to make payments that cannot be fulfilled. It is always better to make a modest commitment and deliver, than make an overstated commitment that will inevitably be breached.

If concerns already exist about the possibility of insolvency proceedings, take early legal advice.

By lodging a caveat in the appropriate court no insolvency appointment can be made without you first having notice of such an application, thereby giving the opportunity to redress the situation, albeit at the last moment.

Our appetite for new venues to eat and drink will undoubtedly continue, and many such businesses will immediately flourish.

For those ventures which falter, good communication skills will go a considerable way towards overcoming financial challenges and are essential to the attainment of success in the longer term. brought to you by