Businesses battle with uncertainty

OPINION: Having a plan of action, and taking advice at the outset, is crucial to surviving financial stress.

Businesses are now facing uncertain times. In recent months, we have seen several factors converging that impact the operational and financial viability of many businesses.

Businesses that are trying to recover from trading difficulties and income lost during the past two years are facing high inflation, higher basic costs, material shortages and delays, increasing wages costs and higher interest costs.

It is expected the financial fallout from restrictions imposed by the Government as its response to the Covid pandemic will also now start to be felt.

Much of this impact was deferred by interim financial assistance and limitations placed on enforcement action, which either has ended or will shortly.

The natural tendency “is to hang in there” and try to trade out of financial difficulties. This can work, but it can also delay the inevitable, and create increased personal financial risk and liability for business owners.

For a business suffering from financial issues, acting quickly is the key.

Early action can open up a wider range of options such as restructuring, informal arrangements with creditors, refinancing, or the sale of all or part of the business or its assets. If left too late, options become more limited, and receivership, liquidation or bankruptcy becomes more likely.

Communication with creditors is essential.

Creditors and suppliers need to be kept informed of any difficulties, reasons for any delays in payment, and proposals to remedy defaults. Creditors and suppliers are also in business and rely on timely payment for their own survival.

Where a debtor fails to keep creditors informed, a creditor will typically force communication by legal means — formal debt collection action or proceedings. At this point, the ability to negotiate arrangements is greatly reduced.

Having a plan of action, and taking advice at the outset, is key.

I have a significant amount of experience in the area of insolvency and can advise and assist businesses with options for dealing with financial difficulties, including negotiating and implementing informal arrangements with creditors, or more formal options such as restructuring or the sale of business assets.

For a business suffering from financial issues, acting quickly is the key. Early action can open up a wider range of options.