How to self-administrate your UK business out of financial trouble

Updated: Jun 19, 2018

Every business owner in the UK has been at this point at some stage or in fact stages of a company lifespan. It's stressful, effects you personally and professionally and is a daunting position to be in. However, out of the ashes will rise a powerful, focused and successful company as a result. Embrace the fact that you have X weeks left to trade and trade out of trouble with these 8 helpful points.

1. Credit Control

Credit control, credit control, credit control. This is key and crucial. Ensure that your clients are paying your invoices in line with payment terms every time. Any amounts outstanding past 30 days for example need to be collected and done so quickly and professionally.

2. Establish good agreements with suppliers

Again, extremely important to do. Pay back debts in line with your cashflow budget and meet every payment schedule. More often than not your suppliers will understand your predicament (they would have experienced the same themselves!) and will agree to a repayment plan as going bust will likely mean they will not get the money owed.

3. Speak to your bank

Don't be afraid to speak to your bank relationship manager (if you don't have one, phone and ask for one to be assigned to you) to see if you can establish a temporary 3-month overdraft or extended overdraft facility to ease cashflow and debts repayment.

4. Pay all of your suppliers by cheque

A very helpful trick to help you trade out of cashflow crisis. Rather than pay your suppliers by bank transfers pay them all by cheque to elongate the cash-out periods of your business. Post the cheque by second class mail as well as this entire process will traditionally give you an extra 7 days of cash in your business. Helpful right?!

5. Speak to the HMRC

Again, don't be afraid of the revenue. They are no different from any supplier and like above will want your money. Going bust will mean they will unlikely recover any liabilities. Explain your financial position or specifically request a local enforcement officer to come and meet with you. Long gone are the days of tan-suits and grey-haired men with briefcases knocking on your door threatening to shut you down. The majority are like us who have a job to do and are there to help. Agree to a repayment plan you can afford for any outstanding liabilities (wind in your existing calendar month liability as well for an extra helping hand) and then meet every scheduled payment. Usually this will be by Direct Debit.

6. Speak to your landlord

Talk to your landlord and explain your predicament and agree either a short-term rent-free or rent-reduction period to alleviate cashflow stress. They would much rather have some money than no money at all from un-rented empty office space. If you're a small business or a business with remote workers, close down your office space and move to a cheaper facility or even work from home.

7. Go through every overhead

This is actually an important exercise to do bi-annually or annually. As the title states, go through every overhead of your business and cut back or cut out. Speak to every supplier even if it a cloud business platform and ask for a cheaper deal as a starting point.

8. Make employee redundancies

This is always a very difficult subject and can draw you in from an already stressful situation to an even more stressful situation. We would also recommend contracting an HR Department to assist you with the legal and operational process. However, you have fiduciary duty to do what is required to save your business, yourself and the staff who will be left with you after the redundancy period has ended. Survival of the fittest is the attitude of which you as the business owner are top of the food-chain and everybody else is expendable. Without impacting the performance of your business make strategic redundancies to save money in any areas that are bloated or simply “ideal to have” rather than “essential to the business needs”. If possible, merge roles and responsibilities as well. If that is not possible then consider outsourcing to a company or self-employed consultant. Transparency with your staff will help however no matter how you announce it, it's a bitter taste for a short period but with a sweeter long term gain. It must be actioned if cutting staff costs will ensure your business remains open and can trade out of financial problems.