First things first, evaluate your business model and operations. What resources and costs do you currently have? Why do you have them? Ask yourself, is every resource needed? Can you cut costs in anyway? What can be looked at…
Employees are a key cost in a business. Though they are essential to keep the business running, evaluate the need of each and every member. Assess the skills, role and performance of each staff member as well as their efficiency. You may notice how costs can be saved if some jobs are cut; perhaps the roles are no longer essential or perhaps a machine can do the role more efficiently? For example, a manufacturing firm may have 20 staff hired to work on the production line of a fast-moving consumer good. In reality, if a more efficent machine or process is brought in, would 20 staff still be needed? or could the process run better with say, just 2 supervisors of the machine, manager to run the company and 2 admin staff monitoring the daily functions? Similarly, what about upskilling staff so that they can be multiskilled and cross-functional, reducing the need for so many individual departments?
Are you on top of your finances? Do you know what cash is coming in and going out? Is it crucial to have a cash flow forecast to ensure you are on top of your finances. This will also help you be protected later on if any cases of wrongful trading occur. Note. Take a close eye over expense payments which are being claimed. Are all necessary? Be professional and act accordingly- if the expense is not necessary then discuss with the employee and explain you have to reject for the time being. Similarly, are there any items you have noticed that are unnecessary i.e. do you have a company car? Do you offer discounts? Can you afford these anymore or can you halt such costs for the time being?
Can you use a cheaper supplier? Are the raw materials you are getting too expensive? This of course may come at the expense of quality, but is this a fair enough trade-off among the circumstances? This has been seen in many companies. As coronavirus has impacted, many have had to look to cheaper suppliers in order to survive. Customers may or may not notice the difference but surely the main point here is that it brings benefits to survival and putting you in a better financial place. What about your current supplier too – can you get a better deal with them? It works for both parties, they cannot afford to lose you and you cannot afford to lose them, so be reasonable, have a discussion and see if a negotiation can be made.
Raise alternative methods of finance
There are many methods to do this; can you sell any assets to raise cash? Have you tried crowdfunding? Can you get a loan?
To apply for sources of finance you will need business financial documents and evidence that you are struggling to pay but are worth investing into.
And if you can’t cut costs enough and there is a large debt then there is something you can do!
If you are still struggling then you may need to look into working with an insolvency practitioner,who can assist you further. Be sure to act quickly before things spiral out of control. A company voluntary arrangement is a way to cut costs quickly. Once a proposal is made and the creditors agree to have some of their debt paid back over time then the mechanism can allow big costs to be cut.
- Employees can be made redundant at no cost to the company
- Expensive premises can be vacated at no cost
- Onerous contracts can be terminated
- There can be no legal action against debts bound into the agreement.
In addition, the directors have full control of the company, unlike in administration, which almost always results in less return to creditors and a much smaller business if it is sold.
The impact of coronavirus has pushed many manufacturers into insolvency procedures. Bagel Nash were saved by Golden Acre Food Group by form of a pre-pack, after facing difficulty from the pandemic. Likewise, we saw sandwich maker, Adelie and North West based manufacturer, The Cartwright Group, collapse into administration.
So, take note from these tips and seriously consider your options. Think and act now – this will streamline your business model for the following financial year and leave you on a better footing to increase chances of viability in a tough marketplace.