So your business is going through a tough time, building up debt, dropping clients and running out of working capital. To minimise any financial and personal stress and has the best chance of full business recovery, it's important you confront the challenges quickly.
Below we summarise the key considerations for owners of SMEs who are looking to trade out of a slump.
Understand Your Business Position
The first task is to review your business position. Sadly, not every business can be saved even with the most effective recovery strategies. In these cases, you need to learn how to minimise the damage caused by the closedown. And all procedures have been followed to avoid statutory compliance risks. It is also important to understand your risk exposure to the business. The best strategy is to talk to a professional who can guide you through every step of the liquidation process. If you are struggling and want to access your business position, contact us to get a free consultation.
Get Your Debt Managed, Fast
Debt management is the unique challenge faced by all the underperforming business. If you are hesitated to pick up debt collector's phone call, you are not alone. If the assessment showing the business is sustainable, measures should be taken to keep the debts under control. And the debt management involves debt negotiation and financing.
Most of the creditors can accept a payment plan as long as you can meet the repayment schedule. Under certain circumstances, the professional can help you negotiate with your creditors for them to accept concessional payment.
On the other hand, it is normally hard for underperforming business to get financed. In saying so, there are still couples of ways you can improve your working capital. For example, invoice sooner and provide a discount for early payments. If you want to seek for business financing, it is important to do this sooner rather than later while your credit rating is not too bad. But you need to be careful that not all finance products can ease your cash flow problems. Some might charge high interest or have highly restricted terms for repayment. Always talk to your accountant before you sign up any financial deals.
Work to Trim Costs Where You Can
Apart from getting the debt under control, You need to look at your running expenses, staffing cost and inventory level. You need to be tough here if your business is to recover. If you find a product, process, or someone does not add value to the business, reconsider it. Remember a success business keep reviewing its budget to fit the changing business environment. The funds freed up from this process can be used to pay down the debt, invest in income generating factors and to support business recovery.
Motivate Your Staff
A successful turnaround will ride, often to a very significant degree, on the performance and retention of staff during this critical period. The business’ staff need to be motivated to do well. Leadership at this time is key and engaging staff on solutions to specific problems can be critical to defining and implementing the change necessary to effect the turnaround. Reward and recognition of performance are also important in this scenario.
Most importantly, the business owner should never lose sight of their importance in the process. Positivity, motivation, stamina, open-mindedness to change and energy are all critical resources in these situations, so you need to look after yourself and keep in the right frame of mind.
How We Can Help
In the challenge situation, you need to seek advice from experienced professionals. At Tax Ezi, we have more than ten years experience in helping underperforming business. Our tax professionals will help you to understand the business position, remodeling the business structure and making a plan to tread forward. If your business is underperforming and needs real advice, please feel free to contact us for a free consultation.