You might have already been considering improvements over the break but there is still an opportunity to fully appraise your operation and instigate some impactful and meaningful change.
Here are some ideas that might be beneficial for you, your business, staff and customers and could, despite the tough headwinds continuing to blow, make 2022 a real year to remember.
It’s not how hard you work, it’s how you work
While the pandemic and subsequent restrictions forced a lot of companies to adopt new and novel working practises, it might inadvertently unlock a positive advantage for the company in terms of productivity and efficiency.
Instead of thinking about how you operated before March 2020 - imagine you were starting your company today.
What would your setup look like to meet today’s hybrid working environment?
Some industries require workers to be present on a premises but for others there are gains to be made from formalising previously temporary arrangements.
Can you make any changes to make the system work better? Does any equipment need to be updated or purchased to enable remote working to be even more effective? Do you need to incorporate new training into your business to make it work more efficiently?
Also consider what didn’t work as well as you had originally planned. Can this be altered to work better or do you need to write it off to experience and revert to previously successful patterns and processes?
It can be tempting to commit to exciting, major changes at this time of year - personally and professionally - but take a moment to consider the impact on the business and whether incremental improvements might be a better and more sustainable goal.
Can’t someone else do it? Automation and Outsourcing
The past two years have seen a plethora of automated and remote solutions rise to meet the newly created demand for businesses having to operate at different locations or under altered circumstances.
This might have been a jarring experience for entrepreneurs and business owners who are used to being hands on and doing everything themselves but it might also have shown them that it can be viable and productive to let someone else take the strain of some essential but time consuming tasks.
Whether it’s accounting, HR, order processing, social media or any of the hundreds of other tasks involved with running a modern business, the new business environment shows that automation has finally met its moment and can handle the demands and expectations placed on it when the idea was a novelty.
Time is going to remain the most precious commodity a director or leader within a company has, so dedicating as much of it to the truly critical tasks is easier than ever.
Reboot your business plan
A business plan isn’t a holy relic that remains unaltered for eternity. Nor is it a collection of promises pulled together to secure funding when the business was just starting out.
It’s an active and adaptive mission statement and roadmap on how to get there and like any good company, should be flexible enough to adapt to changing conditions and circumstances.
Now is the perfect time to have a look at the plan, especially if it was written pre-Covid, and adapt it to your new surroundings and your new horizons.
Maybe your initial goals have changed since forming or joining the company. Maybe you’ve already surpassed them in which case, what have you been working towards in the meantime?
Rebooting your business plan for 2022 will not only be a refreshing exercise but will help clarify priorities for the company and individuals within it to work towards as well as getting a better understanding of how their work impacts and improves the firm for everyone else involved.
Another key part of the business plan that should also be revisited is the marketing/advertising/promotion sections.
Hopefully it has been updated since the advent of social media and the internet but even the past two years have seen seachanges in the environment that need responding to in order to take advantage of a more cyber-based customer base.
Reaching existing and potential clients where they want, how they want is going to be an essential building block in any successful company’s sales strategy and should be integrated into the main business plan and updated regularly if it isn’t already.
Take the customer journey yourself
This could be the ideal time to put yourself firmly in the shoes of your customers.
Check out your website from their point of view. Try and purchase something and see how easy or not the journey is.
Does it need to be simplified or tweaked?
If you’ve got a physical store or have regular face-to-face customer interaction then ask a friend to do the job and let you know what they honestly thought about it.
While you’re the owner/director of your own business, you’re a potential customer to every other company out there so it’s important to assume that role for yourself and test your own process occasionally.
Ask an expert
The final piece of advice is probably the simplest.
It can sometimes be hard to get a truly objective view of your own business because it’s yours - you have put so much of yourself into it that even if you want to be objective, it can be virtually impossible to separate yourself.
So having a new, impartial pair of eyes take a look at the business from top to bottom and come to some concrete conclusions could be a huge benefit.
For business owners and directors we offer a free initial consultation where we can talk about what obstacles the company faces and give our impartial advice on what options there are to improve the situation.
We also offer a business viability review that looks at how the company operates on a day-to-day basis and how it could survive for the next 12 months based on cash flow and profit and loss forecasts.
If you’re looking for a new perspective that could help point you in the right direction then we’ll be there to help - any month of the year.
After a day or so, most people get back into their rhythm and routine but what about businesses themselves?
How are they finding the prospect of 2022 - the third year of an ongoing pandemic but without most of the support measures and mechanisms put in place two years ago.
All of this is before most firms can begin trading in earnest and trying to catch up on lost ground from a quiet Christmas period.
It’s not the biggest surprise that, for various reasons, most small businesses are not confident about their prospects in the new year.
The first indicator is new research from the Federation of Small Businesses where more than 440,000 respondents believe they could be forced out of business this year because of an ongoing late payment crisis.
A third of respondents said they had experienced late payment of invoices in the past three months with 8% indicating that the problem was so acute that the viability of their business itself was threatened.
One of the ongoing problems for small business owners and directors is that while they are forced to pay their staff wages, suppliers and other bills on time, they can face longer waits to be paid themselves.
The FSB estimates that more than 400,000 small businesses have closed since the start of the pandemic and a similar number are under threat entirely due to this issue.
Mike Cherry, FSB national chair, said: “Late payment was destroying thousands of small businesses even before the pandemic hit which has made matters worse.
“The government has rightly identified greater board accountability as a key to spurring change in this area from bigger companies but delivery has been slow.”
The FSB has said that every large business and government organisation should abide by the prompt payment code that makes 30-day payment terms the norm. They also want every large corporation to have a non-executive director on its board with direct responsibility for payment culture.
Late payments are just the latest headache for directors this winter with a confluence of threats converging at the same time.
Another finding in the survey with 1,200 small businesses responding shows that the majority expect their performance to worsen over the next three months rather than improve, especially in the retail, hospitality and food industries.
The main reason given was consumers adopting a self-imposed lockdown to mitigate the effects of the Omicron variant of Covid-19.
Mike Cherry concludes with a downbeat assessment of the state of play facing businesses.
He said: “Today our members are struggling with a fresh wave of admin for importers and exporters. In three months’ time it will be a hike to National Insurance contributions, a rise in dividend taxation, business rates bills and an increase in the national living wage.
“On top of that, operating costs are surging with many trying to strike energy deals without the protections afforded to consumers.”
The final issue mentioned points to a significant threat to companies that is already looming large in 2022 and that’s the cost of energy.
Mike Cherry rightly points out that unlike individual consumers, businesses are not protected by the price cap imposed by energy sector regulator Ofgem so a workplace can be subject to far higher gas and electric charges than a residential property.
The FSB survey showed that energy costs were the biggest concern for almost half of respondents posing nothing less than an “existential threat” to firms already struggling to meet their financial commitments.
Craig Beaumont, who conducted the survey fieldwork for the FSB said: “Many small businesses tend to buy their energy via fixed rate deals but when these end they face much higher charges, especially micro businesses.
“These costs really could prove to be an existential threat to them particularly for the fragile end of the small business sector which is emerging from Covid-19 restrictions.
“Anecdotally, we’ve found that energy bills are the main reason why some small businesses have remained closed and kept their staff working from home. It’s one of the only ways they can protect their finances against these rising costs.”
Even with a price cap in place, domestic customers could see their bills rise between £1000 and £2000 annually from April but this protection is not offered to small businesses who could see much larger increases.
The FSB is lobbying government to extend the same protections households enjoy to businesses but there has been no indication on this or any other measures to offset the incoming price shock.
A lot has been written about 2022 being the year of the cost of living squeeze for customers but relatively little has been said about businesses that will undergo the same external pressures on their livelihoods.
Thousands of small businesses are set to bear the brunt of energy price hikes while simultaneously coping with inflation at high levels not seen for years as well as forthcoming wage, NIC and business rate increases. Importers and exporters are also having the added complications of new administration rules coming into force after being delayed for 12 months last January.
March will also see the final withdrawal of protections against creditor actions including winding up petition restrictions and statutory demands.
Whether your business is already undergoing negative effects from current trading circumstances or if you’re worried about what the various issues will do to your company and prospects this year - there is something you can do today to help yourself.
Once they get a clearer and complete picture of your current status and what other changes are due to affect your business then they can come up with a plan and strategies to strengthen and protect you and your staff from the worst consequences of not taking action.
You might be surprised by how many options you might have to satisfy your creditors and keep the business running - but only if you get in touch and soon.
2022 could yet turn out to be a great year for you and your business - but realistically, only if you do something about it.
It’s called a winding up petition and is a demand for the repayment of overdue debts but it comes with the additional threat of closing a business down if they don’t repay after one has been issued.
There are several courses of action a business owner can take if they receive one but we need to be clear about what a clear and present danger to the future of the company receiving one is.
Even if liquidation is ultimately avoided, this doesn’t mean the company can escape being harmed or damaged by the experience.
They could still see business bank accounts frozen, restrictions on trade issued by suppliers, their public reputation suffer once word gets out and staff possibly leaving if they think they could be looking at redundancy soon.
It’s true that the use of winding up petitions has been restricted under CIGA (the Corporate Insolvency and Governance Act 2020) but these have been loosened since October 1st 2021.
Now the following actions can be taken by creditors:-
There are some caveats including:
For companies already juggling renewed Covid-19 restrictions during one of the busiest trading periods of the year with possibly more to come - a winding up petition is literally the last thing they would want to see.
The first thing to do is to get some impartial, professional advice from a licensed insolvency practitioner.
They will be able to suggest one of the following courses of action but will be able to give guidance based on the exact specifics of the situation.
Generally there are five proven strategies for effectively dealing with a winding up petition if the debt is beyond dispute.
Now this might not be feasible for every business but if the recipient pays off the outstanding amount within seven days of receiving a winding up petition, including costs, then the matter is closed.
If the debt is settled after a seven day period then it might already have a hearing date at the local court.
In which case, you will have to attend and present evidence that the debt has been paid off in full. Unfortunately a verbal agreement doesn’t count so some documentary evidence will be required by the court.
Another thing to bear in mind here is that the hearing will be advertised in the London Gazette and even if the debt is settled, other creditors might join or adopt the petition for themselves to seek repayment.
This is called a “change of carriage” and means the hearing will proceed but it will be about the new debt, not the one that’s just been paid.
If the business is able to repay the debt although not immediately or in one instalment, it might be possible to reach an informal payment arrangement with the creditor.
Remember this has to be adhered to and will probably include the creditors’ costs too so might not be ideal if it will be a struggle to repay.
An adjournment will give the debtor more time to pay the debt and will be granted if there are reasonable grounds to back it up.
This can include if the debtor is planning to repay via funds from an assets sale or other third party funds. They can also be granted additional time if they need it to put a CVA in place.
Entering administration automatically freezes all creditor actions against a business including winding up petitions as part of a moratorium. During this time, an external administrator will be able to come up with the best strategy for the business to proceed.
Alternatively, directors might prefer to enter a Company Voluntary Arrangement (CVA) arrangement.
This allows a business in debt to reach an agreement with creditors to repay a proportion of the debt over a longer period, usually five years.
While they can be agreed before any winding up petition hearing, usually an adjournment is needed to give the necessary time for an administration or a CVA to be properly prepared by a licensed insolvency practitioner and agreed by all parties.
If it is unlikely that the business will be able to raise the money to repay the debt then the most efficient strategy would be to enter a Creditors Voluntary Liquidation (CVL).
Implementing a CVL would provide the necessary time to reach an agreement with the creditors as well as being able to handle all the additional necessary tasks including any redundancies, settling personal guarantees, directors loans and any lease terminations that would arise.
Things are getting tighter for a lot of businesses and the forecast for Christmas is looking more challenging by the day.
Increasingly tough circumstances can force businesses to make decisions they otherwise might not have made previously, including chasing debts a lot harder than usual which could mean issuing winding up petitions, even with the current restrictions.
Every business owner and director facing this environment needs to be alert to the changing of the mood and prepare themselves and their companies accordingly.
The easiest and quickest way to do this is to get in touch with us and take advantage of a free initial consultation.
After speaking with one of our expert team of advisors, you’ll have a better idea of what you can do - right now - to make your business stronger and more resilient this winter, no matter how strong the following winds become.
Some can be similar but they are never identical because no two businesses are ever alike. Even if they are financially similar or facing some of the same issues, there are always other factors that differentiate between them.
This is why knowledge and experience always help when it comes to recommending the best course of action for them to take.
But a lot of firms who go on to be clients and others that choose a different path often ask the same question at the very start:
We see that a lot of internet searches that bring people to our website start with this question or a similar one like “can you close a company with debts?” or “can I close my company online?”
So we’ll do our best to answer it right here - how do you close your company down?
The thing to know is that any limited company can close down - whether it has debts or not.
Sole traders operate slightly differently but this is the first fork the closing down path takes for us.
If your limited company owes money to anybody (they’re known as creditors) then they can close down through either a Creditors Voluntary Liquidation (CVL) or a Compulsory Liquidation.
If the business has too much debt to reasonably pay off then it or its creditors can appoint a liquidator who will help them close down but whose main role will be to protect the interests of the creditors.
They will look to sell any company assets and use the money to pay off the debts.
The liquidator will deal with any creditors from day one and any legal actions against the company will automatically cease.
Once the process is completed and the business is closed, directors will be free to move onto their next venture without any debts hanging over them.
A compulsory liquidation, or a winding up petition as it’s also popularly known is when a creditor decides to take the initiative themselves and go to court to try and close the company.
This will force the sale of its assets so the creditors would then receive a proportion of the owed debts.
This is less favourable than a CVL for many reasons including that the creditors are in charge of the process, not the directors and that a business facing a winding up petition could see its bank accounts frozen, its suppliers stop providing services and possibly having their commercial leases terminated.
Additionally the Official Receiver, who will be appointed by the court to oversee the process, will investigate the conduct of directors which could lead to fines, disqualifications and being made personally liable for specific debts.
Businesses that are solvent and could repay their debts within 12 months if they closed have some other options.
The first is a Members Voluntary Liquidation (MVL).
An MVL is a process used to formally close a solvent company.
Some might question why an insolvency practitioner has to be involved if the business can service its debts in a timely manner but their main purpose here will be to help the directors realise their assets more quickly by helping them dispose of them more quickly than they could themselves.
As well as being a relatively quick, simple and efficient way of closing a business down, an MVL is also tax efficient as directors may be able to claim Business Asset Disposal Relief (BADR) which was previously known as Entrepreneurs Relief.
This allows directors to pay a tax rate of 10% on asset disposals rather than the higher Capital Gains Tax rate although it’s always wise to seek advice from a tax professional in this situation.
A business that isn’t in debt but has owners that want to move onto something else and close it down also have another option called dissolution.
A company dissolution, also known as striking a business off, is the simple formal action of removing the business from the Companies House.
It’s relatively straightforward and inexpensive to close a business that isn’t trading anymore or doesn’t have a feasible future but there are several specific conditions that have to be met in order to legally dissolve the company this way.
Like any other method of closing down a business, directors should get some professional independent advice before pursuing this course of action or any that will lead to the end of their company’s trading life.
We offer a free initial consultation for any business owner or director to take advantage of at their own convenience.
An experienced advisor will offer a friendly ear to listen to what issues are facing the business then be able to work with them to outline the best steps to take next.
Although they sound and in some cases can be quite complicated, the different ways to close a company down are just different tools from the same toolbox.
You wouldn’t use a hammer to tighten a bolt or a screw - and some methods can’t be used depending on the unique situation of the individual company but if you need or want to close down a business then there will be a solution for you to choose.
Owners and directors of cafes, bars and bistros might look back after all the hard work of getting everything ready, managing an overworked booking system and maintaining high levels of service and satisfaction and also reach the same conclusion - although possibly after they have had a chance to rest first!
And who could wish them anything but the busiest of months after the most trying times the industry has been through within living memory.
Unfortunately recent events are indicating that the sector could be facing an even tougher time this year.
The background noise is already increasing with the number of restaurants in the UK going into insolvency - including administration and liquidation - rising 31% in the previous quarter of the year from 226 to 296.
This coincides with both the end of the coronavirus job retention scheme or furlough at the end of September and the slight relaxation of creditor actions including bringing winding up petitions.
It’s also coinciding with a cash flow crisis for the industry as they compete with each other for eligible recruits driving up wages as experienced and skilled staff become scarcer and more expensive as a result.
They had to decide whether to bring back existing staff from furlough or instigate redundancies. They also had to judge if they had to restock inventories, clean and refurbish premises that might have been closed for months on end and make them covid safe to reassure nervous customers.
Restaurants and bars have to decide if they want to take up these additional costs themselves or increase their prices just when customers are needed the most.
They will also have to start repaying bounce back loans if they took any out as they have now come due.
Unlike last year there were no advantages from an “eat out to help scheme” which gave the sector an £849 million boost in August 2020.
All of this has happened before the emergence and rapid spreading of the omicron variant of the coronavirus which has necessitated renewed government health advice including social distancing and mandatory mask wearing indoors.
The effects of the new variant are already being felt by hospitality businesses even while the number of actual cases in the UK is still relatively low.
Data released by OpenTable and the Office of National Statistics this week has found that the number of people dining out across the UK has fallen to its lowest level since May - when indoor dining was permitted again.
In the past week alone the seven-day average of UK seated diners fell by six percentage points.
Kate Nicholls, chief executive of trade body UKHospitality said that a second Christmas lockdown would be catastrophic for a sector still rebuilding from the previous 18 months and one that is heavily reliant on the festive period.
She reported that members are already seeing an increased number of cancellations, which would lead to a serious financial impact on hospitality businesses.
She said: “There will undoubtedly be an impact as consumers digest the news and take steps to protect themselves, while travel restrictions may mean some bookings are being cancelled.
“Fears about the Omicron variant would have a chilling effect on confidence just as we were about to head into our busiest trading period.
“Any drop in revenue pushes businesses back to loss making as grants and other support have fallen away. Last year we had grants, reduced VAT and full furlough but none are in place now. Businesses simply won’t be able to cope as substantial restrictions should mean substantial support.”
Representatives of the nightclub industry are even more downbeat about their immediate prospects.
Peter Marks, chief executive of Rekom UK which has 46 UK venues formed from the administration of Deltic earlier in the year points out that the nightclubs had already been closed for longer than any other hospitality segment and had received less support too.
“If we lose Christmas and new year it would cost millions and mean you would not have the cash to see you through the already sparse trade of January and February.
“Even restrictions such as having to ask for vaccine status on the door could have major effects as slow queues in freezing conditions are not conducive to great trade.”
Chris Horner, insolvency director with Business Rescue Expert, is worried that thanks to longer term changes in customer behaviour, cancellations caused by short term events such as Omicron could become a self fulfilling prophecy.
He said: “Even if the Omicron variant is less of a threat than we fear, and we all hope this is the case, it will still negatively impact on the hospitality sector that needs a good festive trading period.
“Unfortunately one of the problems they and every business face is that every new wave of the virus changes and embeds the way customers and the wider economy functions.
If Omicron does take hold and is followed by other variants then it’s logical to assume that there will be more working from home, renewed restrictions and a further shift from face to face interactions to online.
Which means customers will be even more likely to stay at home regardless of the actual threat - it’s a vicious circle.
“Sadly for restaurants and bars, they are caught right in the middle of it and unless they can scramble and come up with some alternative offerings such as take outs or delivery then, impossible as it might seem, they may have an even worse Christmas than last year”.
That’s the sobering reality facing thousands of pubs, cafes, bars and other businesses that need a good Christmas trading period just to help them return to pre-Covid levels of income in many cases.
So this could be the perfect time to get in touch with us and book a free initial consultation with one of our expert advisors.
Once they get a fuller picture of the situation your business is facing and what the immediate threats are they can get to work on finding some effective solutions.
You might be surprised at how many options you could have but only if you act quickly. If you wait and see what happens over the course of Christmas then it might end up being too late which is the end of the year that nobody wants.
They tend to be more agile in their decision making process and can take advantage of new trends and fashions days and sometimes weeks before bigger and more cumbersome companies can react.
Online shops, blogs and websites can be created, tested and launched within hours rather than having to go through various layers of sign-offs and approvals.
Ultimately, depending on the business or the industry, moving to limited company status might be the more logical option initially as the flexibility can more than make up for the other advantages legal limited company status confers.
But what about if things start going wrong and debts begin to build up? This is where being a sole trader can become a hindrance rather than a help.
One pertinent example of this is when it comes to business debt.
The legal structure of a limited company gives directors and business owners protection and separation from debt as they are attached to the company not the individual.
This is not the case when it comes to a sole trader. Here the debts of the business are also the debts of the individual and vice versa.
They are also limited by the range of options available to them in the event of insolvency.
A sole trader can choose between an individual voluntary arrangement (IVA) which is similar to a company voluntary arrangement (CVA), an informal payment arrangement with creditors or bankruptcy if no viable alternative can be found.
For debts of £15,000 or greater a rarer but effective sole trader voluntary arrangement can be entered into but this is more specific.
These methods can be used to face regular financial difficulties but what about County Court Judgements (CCJs) and why do they pose such a unique threat to a sole trader?
In the latest set of figures released from the Registry Trust there’s been a huge annual increase in the number of CCJ’s awarded in Q3 2021.
There were 21,769 CCJs brought against companies including sole traders between July and September this year which is up 139% on the 9,101 recorded for the same period last year.
There was also a 51% increase between Q2 and Q3 this year alone.
Chris Horner, insolvency director with Business Rescue Expert, thinks this is just the latest sign of a tightening economy, especially for sole traders and SMEs.
“As we saw when we looked at October’s corporate insolvency statistics from the Insolvency Service last month, although there was a slight monthly dip, they were still higher than the same month a year ago for the sixth consecutive month.
“The Bank of England is also reporting that there’s been a 44% rise in small businesses defaulting on loans in their latest credit conditions survey.
“It’s not a coincidence given that no matter what trading conditions have been like for a company, if they took out a bounce back loan then even if they delayed the original repayment date by six months, it will be coming due now.
“We’re already seeing a more aggressive approach from HMRC in recouping these debts including objecting to dissolutions if the business has a bounce back loan or if they have defaulted on a time to pay arrangement.
“The rise of CCJs and other current circumstances are already difficult enough but for a lot of firms these demands could push them over their breaking point which is why so many are looking at what insolvency solutions might be appropriate for them to give them the best chance of still being here in 2022.
“Even if they are not at this stage yet, having a conversation with an independent and expert advisor now might alleviate their fears and give them the outline of a plan B if they suddenly need one.”
Sole traders are especially at risk when it comes to CCJ’s as both personal and business assets could be at risk.
Because they lack the legal protection of a limited company any business debt defaults or other negative impacts will have a direct effect on their own personal credit rating.
Additionally, a sole trader who receives a CCJ from a county court would be expected to use personal finances to repay these outstanding debts, not just to fund their business so it can be a time of great financial jeopardy for them.
Depending on the amount owed to creditors, they could look to instigate further action against them including petitioning for bankruptcy although an individual voluntary arrangement (IVA) would prevent this course of action.
While a CCJ would have a less drastic effect and threat against a limited company, they should still be treated seriously.
While not having the capability to force a company to repay its debts, they do grant High Court Enforcement Office and bailiffs the right to visit premises and seize assets up to the value of any outstanding amounts.
Creditors also have the right to issue statutory demands and bring winding up petitions against the business to force its closure if the debt remains outstanding although this remains restricted until the end of March 2022.
There are also soft consequences to consider.
CCJs appear on the “Register of Judgments, Orders and Fines” which are publicly available and could adversely affect relationships with suppliers, creditors and customers if it becomes known the business has a judgement against it.
There is also the impact on the business’s credit rating which will make future borrowing even more difficult.
The increasing threats from CCJs are only the latest that sole traders, partnerships and other small and medium sized businesses have to contend with.
This was the year that promised a return to trading normality and a chance to rebuild and achieve even more, but in many ways ended up being just as frustrating as 2020.
Now businesses are juggling increased health measures to arrest the sudden appearance of the Omicron variant of Covid-19 with increasingly nervous customers reverting to a safety-first approach which could scupper the possibility of a bumper Christmas period for many companies that desperately need one.
No matter what the next few days and weeks bring, one constant that will remain is our free initial consultation that’s available for any director or business owner to arrange once they get in touch.
We can run through what’s actually happened to their business, explore potential threats and other hurdles and plan an effective and efficient way past them.
So if you’re worried about what the immediate future holds for your company - get in touch today and start building some positive momentum.
Not just the ones that have built up during the unprecedented previous 18 months but also previous arrears that might include PAYE, VAT or corporation tax.
We’ve collected seven simple strategies that implemented individually or collectively could help firms reduce their debt burden, bring in more money during this crucial period and help the business be ready to burst into 2022 firing on all cylinders.
A lot of us hear from people at this time of year that we haven’t heard from in a long while.
Usually it’s nice to catch up but if you’ve been avoiding your creditors then it could be even more important to remake their acquaintance - especially as restrictions on creditors’ recovery actions including winding up petitions have already loosened and are due to be lifted entirely at the end of March.
As well as being polite, it’s also prudent to keep your creditors informed if there’s going to be a delay in making or keeping up with repayments.
Many are running their own business and understand the essential ebbs and flows and will be more liable to be understanding if they are given prior notice.
If the issues causing payment delay are longer term then they may be willing to discuss a payment plan or other relief - but only if you keep to the arrangement and keep them in the loop.
Knowing the ins and outs of your own business is essential to being an effective owner or director but sometimes it can be possible to be too close to be entirely objective.
Occasionally it can be best to take a step back, or even up and look at the problem and the business itself from far outside.
Often called a “10,000 foot” view, it forces the owner to look at the business holistically and give an honest appraisal of its strengths and weaknesses as an outsider would.
They should also take the same approach with finances, to dispassionately look at where the money is going and coming from and where immediate efficiencies and savings can be made.
Money can leave a business in a lot of ways but if one issue is constantly costing a business and it doesn’t need to then this could be a prime candidate for an immediate saving. For instance, if a business incurs fines for unpaid invoices - the finance department could be tasked with making sure this doesn’t happen again resulting in an instant saving.
Applied company-wide, this approach could reap rewards quicker than expected.
A small but not insignificant factor is always trying to remain positive, especially in public and around colleagues and staff.
Managers who project gloom and negativity or publicly complain will signal to their staff and others that they are starting at a disadvantage and don’t have the energy and vision to overcome their issues - even if their strategies and plans are sound.
Being outwardly calm and confident is infectious and can not only raise energy, mood and performance in others but yourself too.
There are three reliable ways to increase the cash flow of a business, any of which can produce extra income that can be the difference between making that bounce back loan repayment or not.
Increasing productivity is the first method.
Discovering new ways to generate revenue or become more efficient and less wasteful is always worth doing.
The next method is to open a dialogue with your vendors and suppliers and see if you can renegotiate for better terms. Even if they won’t alter any agreements, you’ve lost nothing by asking and if they do then you automatically generate better savings.
The final method is another deceptively simple one but could add up to a big win. Keep a close eye on stock levels and usage.
Storing items for a longer period of time than necessary is less efficient all round than just-in-time deliveries. You might be able to work with your suppliers to see if they offer alternative options including consignment inventory or return of unsold goods.
An effective budget is like a computer program - it works or it doesn’t. There are no grey areas or “it sort of works” - the figures are either accurate or they aren’t.
And if they aren’t then it could be a recipe for trouble.
The finances of a business and its cash flow need to be as precise as possible and if agreed in advance stick to as far as practicable.
An accountant or dedicated in-house staff will be able to keep track of the incomings and outgoings and most modern accounting software packages will be able to handle the requirements but it should also be reviewed fairly regularly to see what savings can be made.
Being paid late can be an unfortunate fact of business life and can be damaging for your company if you are relying on the payment.
One little known but very useful measure is that you can claim interest on any late payments at the Bank of England base rate plus 8%. This interest is also calculated on a daily basis for every day that payment remains outstanding.
The capability and intention to reclaim late payments has to be set out within your terms and conditions and even if you don’t intend on using the capability, it could be useful in deterring any businesses who were considering delaying any payments.
Having the legal right to reclaim is a useful insurance policy to make sure that your business will have some income coming in.
A business can be broken down into a sum of its parts. And if those parts could be sold if they are surplus to requirements, obsolete or even quite valuable by themselves then this could benefit your business by making that sale.
If the problems are deeper rooted then more drastic measures might be called for so plant or even unused or undeveloped land could be put on the market to help raise vital funding.
This can also include any under utilised assets including older product lines or stock too.
It’s to make sure you take advantage of our free initial consultation for any business owner or director.
We’ll go through any concerns or financial issues you’re having with your business and help you understand the options you’ve got to improve - probably more than you think you’ll have!
Make an appointment today and you can be more confident that your firm will start 2022 in the best possible shape.
The struggle retailers face as they head towards Christmas is becoming more challenging this year due to the online sales boom which is set out to overtake physical purchases for the first time.
The increasingly quick adoption and acceptance of online shopping by customers has caused concern for primarily physical retailers across the UK and those who’ve been slow to adopt an online element to their business.
COVID-19 might seem to be the primary driver over the past two years, but the reality is that the coronavirus was only a short-term problem. It significantly highlighted the huge distinction between the traditional retail approach and the new competitors who suddenly appear to be overtaking existing retailers and those who have ruled the market for the past several years.
9,500 shops closed down in 2020 and another 8,700 retail chain stores closed their doors for the final time in the first half of 2021 alone.
Even when these retailers were able to begin to reopen, it was a different experience for the vast majority of their customers with many finding it difficult to navigate.
From social distancing measures, queuing to enter stores, wearing mandatory face coverings and other precautions made what was once a pleasure into an annoying pain.
Online retailers are now thriving, with more customers turning to online shopping first as a more modern and efficient way of purchasing products.
Richard Lim of Retail Economics: “Successful retailers have always had to reinvent themselves in order to survive and stay relevant. However, the pace of change will inevitably prove too fast for many.”
One in ten of all age groups recently surveyed intended to do even more online shopping in the next 12 months, much more than they planned to make any physical purchases.
They indicated that this is because the experience of online retail offered broader access and an easier ability to find the latest deals and promotions.
Additionally, it was perceived that websites now offered more exclusive sales and discounts than in physical stores. For example, percentage discounts over certain amounts, and discounts such as Student and NHS blue light discounts that would be automatically applied.
If you’re mainly a physical retailer and this Winter is critical for you then the good news is that there are some practical options to protect your business and buy critical time to make the changes you need to.
Administration sounds official and you might be concerned that so many retailers including names such as Topshop, Burtons and Debenhams went into administration before closing.
But there are a lot more success stories of retailers using the advantages that administration gives a business.
The process allows a business to remain open and trading, keeping their key staff while an administrator helps the company to become more efficient, effective and crucially, will stop all creditors’ actions against the firm while they work on their rescue plan.
The number of corporate administrations have risen for the past five consecutive months and now stand at their highest level in over a year.
This shows that many retailers realise the benefit and are taking advantage while they can.
Alternatively, your business might be trading well but be unable to make a profit due to unsustainable debt levels.
These might be historic and made worse due to the pandemic and trading restrictions brought about by lockdowns or might have grown suddenly due to taking out bounce back loans.
If this is what is primarily holding your retail business back, then you should perhaps consider a company voluntary arrangement (CVA).
It’s a formal legal process that has to be overseen by a licensed Insolvency Practitioner but will see a proportion of debts written off by creditors in return for a reduced, regular repayment of the remaining arrears usually for a period of five years.
Like administration, a CVA will halt and remove the threat of any legal action from creditors as long as the obligations of the agreement continue to be maintained.
The number of CVA’s approved has risen for the last three consecutive months so if appropriate, it might be the best solution for a retailer to truly turn around their fortunes in time for a brand new year.
Sadly, not every business can be rescued and revived.
If you've tried everything and there’s no clear way forward to return to profit and pay off accumulated debts then an orderly liquidation might be the most appropriate solution.
It will treat all creditors fairly and allow the directors or business owners to settle all outstanding issues in an efficient and stress free way. Once a business is liquidated, then owners can begin again either with a new business without debt or can move in a new direction entirely.
The next few months, especially after the Christmas period, might look daunting for many small and medium sized retailers across the UK who can only see more questions than answers ahead.
This is where we can help - by finding answers to specific problems.
We offer a free, initial consultation with an experienced specialist advisor who will listen and learn about your unique challenges and then work with you to find the best solutions.
Get in touch with us today and take the first step on a new journey for you and your business.
The latest series covered what happened last month and while we can analyse the headlines quickly, we also like to dig a little deeper under the surface to see if there are any underlying trends.
One such occurrence we’ve noticed is that for the fifth consecutive month, the number of businesses going into administration has risen.
There were a total of 95 administrations in England and Wales last month (98 for the whole UK), which although below the comparable total for the same month last year (down 8%), this is still the highest total of administrations in a month recorded this year.
Chris Horner, Insolvency Director with BusinssRescueExpert thinks there are a couple of valid reasons why this is happening.
“The most frequently used insolvency procedure right now is a creditors voluntary liquidation or a CVL.
“This is where the shareholders or directors of a business place it into liquidation because it has no clear or obvious way to repay its creditors.
“The fact that administrations are continuing to rise month on month shows that some businesses have a more reasonable chance of survival than they previously would and are doing everything they can to keep trading.
“Not every business that enters administration can emerge as a profitable going concern but it does give those that do several benefits in their battles.
“The first of which is that any company that goes into this arrangement automatically triggers an automatic freeze on any creditor recovery actions such as winding up petitions or visits from bailiffs.
“This valuable breathing space is designed to give the directors and owners time to arrange their response and allow an insolvency practitioner to fully appraise themselves of the situation and work on their restructure and rescue plans.
“If the business can be saved, then they can dedicate their focus into these efforts. Alternatively, they could look to sell the business to new owners under a transaction known as a pre-pack administration.
“This is where the hard work of marketing a business for sale and agreeing the actual terms of the sale are done and settled before the business goes into insolvency.
“If there is no realistic way a business can be turned around and there’s no interest from prospective new owners then the company would probably enter liquidation but this is very much a last case scenario - administration gives them every chance to reverse their fortunes before this happens with the expert help of a licensed insolvency practitioner.”
Any business that enters administration needs to understand that it is a legal process that shouldn’t be taken lightly - especially by the directors.
Even if they fully plan on resuming control of their business if possible, there is no guarantee that the business will emerge from administration in better shape.
The administrator - a licensed professional insolvency practitioner - will do their best to cut unnecessary expenses and other proven techniques or the existing management may bring down the debt burden by exiting administration via a company voluntary arrangement (CVA), which would see a proportion of these debts written off by the creditors in return for a guaranteed, regular monthly payment.
If the business completes this arrangement and emerges from it, control of the business will revert to the previous management.
They will also have the opportunity to buy the business if it is put up for sale although they will have no actual input into any sale process.
Entering into an administration can be a vital pause button for a business that is in decline or even more desperate straits.
It’s not a certainty that it will allow a business to restructure and emerge in better shape but it is a reasonable opportunity, and offers a better outcome for creditors than if the business closes down and goes straight into liquidation.
We offer a free initial consultation for any owner or director who wants to discuss administration for their company or any other process that might help them help their business.
An experienced member of our team will work closely with the director/s to get a clearer picture of the full liabilities and any other exposure as well as what the assets are and if there are any other circumstances in their favour.
They will then be able to provide a full slate of options, probably more than they originally thought they had, to help steer their business in a better direction.
But all of this will only be possible if they make that first decision to get in touch.
In this blog we’ll look closely at how you can manage PAYE payments if they’re overdue and other solutions to paying PAYE debt including contacting HMRC and making alternative payment arrangements if possible.
PAYE doesn’t just encompass employee’s income tax deductions but their Class 1 and 1B National Insurance payments, any student loan repayments and/or any applicable Construction Industry Scheme (CIS) deductions.
Owing PAYE or National Insurance Contributions (NICs) will be a reasonably good indicator that a business is undergoing some financial turbulence.
Unlike VAT, which is paid quarterly, PAYE is monitored using Real Time Information (RTI) for filing monthly payroll returns online so HMRC are automatically informed when tax payments haven’t been submitted on time or at all.
Payments are expected to be made on the 22nd of each month (or the 19th if the business is paying HMRC by cheque via the post).
HMRC will issue a series of escalating penalties for each default incurred within a relevant tax year:
Daily interest will continue to be accrued on all unpaid amounts from the due and payable dates until paid.
Additionally, a late payment penalty charge will be levied if the company pays less than the amount due with an additional 5% penalty applied if amounts are still outstanding after six months.
There are also penalties that can be incurred from failing to report real time information (RTI), specifically the Full Payment Submission (FPS) which automatically informs HMRC of what employees are paid and what deductions the company has made.
Penalties are received if FPS is late or not submitted and are based on the number of employees a business has:
If a business is three months in arrears then they can be charged an additional 5% of the NIC that should have been reported.
If no FBS is submitted or received then HMRC will estimate how much should be paid based on previous payments and submissions and will add this to the amount owed.
HMRC will now be taking a closer interest in where the money has gone because as they would expect the money to have been deducted from employees and ready to be paid.
If they suspect that a business has deliberately sought to avoid paying PAYE or NICs or have acted fraudulently in any way then they could issue a Personal Liability Notice (PLN) which will probably lead to an HMRC inspection of the business which could ultimately see directors made personally liable for any outstanding debts.
When it comes to enforcement the first thing HMRC will do is issue a demand letter which is the first step in their recovery process.
It might be tempting to ignore them if the business is struggling but while this is always a mistake, this is especially true in the case of demand letters as if the business later goes into insolvency then the letters could become evidence in proving the business was insolvent and therefore wrongfully trading at the date they were received.
The ramifications of this include directors possibly becoming personally liable for losses and debts incurred after this date.
If the debt remains unpaid after this then HMRC will most likely issue a notice of enforcement which gives the business 14 days to pay the debt in full or they will be visited by bailiffs to seize goods and equipment.
If the business is still unable to pay PAYE at this stage then usually HMRC would move to have the business wound up but as restrictions on winding up petitions still remain until the end of March 2021, this step might be delayed unless the cumulative debt is over £10,000 in which case the petition can proceed.
Chris Horner, insolvency director with BusinessRescueExpert.co.uk says that although the situation is serious for businesses in this position it’s not unrecoverable if the directors act quickly.
He said: “The first thing directors and business owners that owe PAYE or other overdue debts to HMRC should do is get some impartial professional advice as soon as they can.
“Every day they delay could add to their arrears through penalties but this is less of a threat than not acting at all or not getting guidance before making decisions.
“Depending on the situation a business is in, they could approach HMRC to ask for a Time to Pay arrangement (TTP) but it would depend on their previous remittance record and how quickly and honest their communications have been.
“HMRC payment plans aren’t granted automatically and depend on several factors.
“We have a good relationship and record of dealing with HMRC and can negotiate on their behalf but the ultimate decision rests with them and will be influenced by previous interactions. This is why honest and open communications are so important.”
Debt is a natural part of the business cycle and most companies will be debtors and creditors at some stage during the working year - sometimes at the same time.
It only becomes a problem when the debt can’t be serviced when it comes due or business owners have to make a choice on which debt repayments they have to make and which they have to fall behind on or if PAYE repayment is becoming a regular pain.
Some creditors can be negotiated ahead of this and will understand if a payment is going to be late or will make allowances of a missed installment.
Others, such as HMRC, will take a tougher approach and will begin recovery proceedings almost immediately.
If you’re a business owner or director who’s facing these tough decisions then you can help yourself by getting in touch with us as soon as you can.
We offer a free initial consultation with an experienced, expert advisor who has handled hundreds of similar cases in their career and will be able to give you personalised advice once they get a full understanding of your situation.
The earlier you get in touch, the more options you’ll genuinely have to decide on and implement such as an insolvency moratorium or other processes which will halt creditor actions and give your business some valuable breathing space.
But we can’t help at all until you make that all important first call.