Cash is king in every business. We have been exploring ways to preserve it by cutting rent bills, finding cheap ways to help staff working from home and sharing overheads by collaborating with rivals.
But in some cases, the demands from suppliers will overwhelm your coffers. Try as you might, you just can’t pay them all and the demands are getting angrier.
In normal times, it might be time to take the horrible decision to call in the administrators. This puts a stop to creditors’ demands, with accountants taking over and working out how to return as much as possible to those you owe.
But if you really think you only need a few weeks’ grace, there will soon be an alternative.
The Government is introducing a new form of insolvency process that allows you a moratorium against creditors for an initial 20 business days. Unlike in administration, the current directors can continue running the company, albeit with an outside monitor overseeing it.
The process will be simple — a matter of lodging papers in court from the directors stating the company is unlikely to be able to continue paying its debts and from the proposed monitor saying the moratorium would probably rescue the business.
So keep a eye on the Corporate Insolvency and Governance Bill — it began its passage through the Lords this week, after a speedy journey through the Commons.
Some things to consider, though. If you take action like this, it will sour relations with creditors. Have you strained every sinew to make deals?
Secondly, as law firm Gowling WLG advises, be honest; is your business going to be healthy again after that grace period? When the Government tapers its assistance, will you be able to stand on your own two feet?
If you can’t honestly say yes, it could be that a more fundamental restructuring is what you need to survive.
