We continue to highlight Managing Partner Neil Hughes’ ‘Seven Cs of Business Recovery.’ As businesses battle the impact of COVID-19, it’s important to adopt the appropriate measures; Now, for tomorrow.
I recently discussed the importance of seeking counsel from a carefully selected group of advisors. Now, for the next step on your business’s road to recovery.
Chapter 2: Communication
Regarding your business’s performance, have you been completely honest and transparent with the people to whom your indebted to? If not, now is the time. Communication is key when it comes to securing their support in your recovery plan.
Devise a comprehensive and transparent plan to work through your cash flow issues then relay this plan to those that are owed money. Don’t fall into the trap of creating a hierarchy of creditors; all are important to your survival prospects.
Let’s examine the importance of communicating with these individuals and groups: the taxman, lenders, landlords and suppliers.
Being honest with your creditors about the condition of your business is likely to a) generate goodwill and b) take the pressure off which will in turn, help you make better decisions.
It is often pride that deters a business owner from being completely honest. There is always the risk that the truth may lessen a creditors’ confidence. In fact, however, confidence is instilled by being upfront and honest.
The more likely scenario is that those who are owed money will appreciate you bringing them up to speed on how your business is performing. You will be surprised with the goodwill you may receive in return. Maintaining your integrity will buy you more time. And with time, many things become possible.
In the previous article, we looked at the potential of seeking counsel from your funder whether it be alternative debt providers or equity players. It’s important to communicate with them frequently, and early in the process.
As your difficulties intensify, try to give them notice of potential problems. For example, if you are about to be hit with a significant bad debt, make sure you inform them.
Develop advice from your accountant and solicitor into a plan that includes financial projections and present this to your lenders. Demonstrate an understanding of why your business is struggling; develop an idea of how it can recover and provide a realistic timeframe in which you can achieve this.
Results are achievable, especially if you have developed and maintained a strong and honest relationship with your lenders.
Dealing with the Revenue
The Revenue Commissioners may constitute your biggest ongoing creditor.
When your business is struggling, it is important you are aware of the key people to deal with in your local Revenue office. Developing good communications with the Revenue means submitting your VAT, PAYE and corporation tax returns on time, even if you cannot pay the liability there and then.
Not submitting your returns will flag you as a non-compliant taxpayer and will mean that you are more likely to be audited. Contact the Revenue and advise why the payment has not been included; set out when it is likely that the liability declared on the return can be paid.
Do whatever you can to ensure substantial undeclared arrears do not build up.
Open communication and renegotiation with a willing landlord are important. Landlords are a significant creditor to most businesses. Lack of communication with a landlord can lead to a crisis for a business. Think of the relationship with your landlord as mutually beneficial rather than adversarial.
For a multi-unit business, if a particular unit is chronically loss making, you may need to consider formal restructuring options to repudiate and exit from the lease on that unit. Acting quickly and decisively can be the difference between survival or closure if there is a particular outlet of your business that cannot be saved.
During a significant downturn, many suppliers will begin to seek COD payment terms, leading to an increase in administration for the accounts payable people in your business. Do everything you can to work with your suppliers and invest in the admin staff needed to juggle the regular payments to keep key stocks moving; focussing on the lines that you can immediately turn into cash.
Effective communication with the people to whom you owe money to will allow you time you need to implement the next stage of your recovery plan.
Read Chapter One Here.
For more detail on how to get your business positioned on the road to recovery, ‘Beating the Recession: The Seven Cs of Business Recovery’ is available to buy HERE.
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