Can your business be turned around?

If your business is looking unprofitable, consider your options and seek expert advice if necessary.

If the coronavirus pandemic has caused your business some issues, attempting to get things back on track will mean taking a long, hard look at how you’re trading.

One of the most important questions to ask is, “Without this debt, would the business be profitable?” For an answer, you may need to seek advice from the experts. Fortunately, there are various places you can find such expert guidance.

Read on to learn more about turning your business finances around, and where to go if you need support.

Questions to ask yourself

Tom Straw, partner at insolvency practitioner Moorfields Advisory, recommends that any business struggling with debt asks itself the following questions:

Are you confident that, long-term, your business will return to how it was before COVID-19? Or, that your projections are conservative enough to be reliable in informing your business decisions?

While businesses in the retail and hospitality sectors may experience a short-term resurgence, it remains difficult to predict the outlook for these sectors over the medium term.

Are your business’ structure and staffing levels appropriate for the long term?

Furlough will give you some flexibility until September 2021, when the scheme is set to end. But you may need to make difficult decisions around recruitment and redundancy in the lead up to this date.

And some sectors – such as hospitality – are experiencing a shortage of staff as they reopen and struggle to fulfil capacity.

Do you have a clear picture of your liabilities, and a detailed and realistic cash flow forecast showing how you’ll repay them?

Your business may have built up rent arrears due to:

• the new legal restrictions that stop commercial landlords forfeiting (ending) a lease because of a failure to pay rent
• additional borrowing – for example, loans via the Coronavirus Business Interruption Loan Scheme (CBILS), which will be attracting interest and soon need to be serviced on top of ongoing financial obligations.

If you do have a shortfall in your working capital, how will you bridge it?

Decisions around working capital are inherently more risky during the pandemic as you may find it more difficult to gain quick access to extra funding.

Signs that your business might be failing

There are many warning signs that a business might be failing. Here are some key ones to look out for:

• You feel under constant financial pressure
• You aren’t receiving as many customer enquiries as you once did
• People or businesses who owe you money aren’t paying bills on time
• Staff turnover has increased
• You’re always at the limit of your overdraft

Learn more about the importance of managing cashflow through times of change and growth.

Expert advice: why it’s important

Free advice on tackling business debt is available from a number of sources.

You can also seek the advice of your lawyer or accountant (if you have one), although turning a struggling business around demands a specific set of skills.

Restructuring and insolvency specialists

These professionals are often able to advise on more than just terminal situations. They are typically very experienced in areas that can help turn around your business, such as:

• sourcing debt finance or equity finance
• managing your working capital
• assisting with business planning and financial forecasting

Tom Straw, partner at insolvency practitioner Moorfields Advisory, recommends that businesses get advice as early as possible. Doing so can also protect directors from risks around wrongful trading.