Cash flow issues are a regular occurrence with any business be it due to their cyclical nature or a temporary downturn in sales/orders.
They can be far from permanent and may not necessarily be an indication of terminal insolvency.
In such situations trading out can be an option if the longer term view is of a viable and profitable business.
It may be possible to avoid an unnecessary formal insolvency procedure and the associated implications.
Is Trading Out The Right Decision For Your Company?
The directors of a business may find themselves too close to a particular situation to make a proper judgement on trading viability.
Any decision must be based on current information combined with a thorough review of the projected trading position.
The threat of insolvency generally focuses the need to make tough decisions on the future of a business, its viability and whether continuing to trade is the most appropriate option.
How a Trading Out Plan can rescue your business
When setting out steps to ensure on-going trading is successfully maintained, it is important to understand the precise scale of the issues and manage cash flow accordingly. The situation needs to have been resolved in the shortest period possible as otherwise unpaid creditors may commence recovery proceedings further compounding issues.
Making your creditors aware of the situation
Keeping a positive dialogue with creditors is important and especially so during periods of short term unprofitability. If creditors are aware of the specific reasons for late payment and the steps taken to rectify this, they may be more amenable to allow temporary extended payment terms. This will not only ease the cash flow issues faced but also prevent court action and possible insolvency proceedings.
If you are considering trading out as an option, there is help available to guide you on areas such as budgeting and business planning.