Business Insolvency - don't leave it too late to ask for advice

I find it more often than not of late, that I am introduced to speak with directors’, their accountants and/or business advisors at an ever later stage in the advisory process, which unfortunately results in a formal insolvency procedure being the only option as opposed to the option of last resort.

Having also seen an increase in the number of unregulated company “advisors”, it is very relevant for those receiving any advice to ask themselves this simple question:

“If my relative or family member was ill or unwell and required some form of intervention, would I rather utilise the services of a back street Dr. with his fancy flashing neon signs offering no frills at rock bottom prices, with no regulatory body to monitor or control those practices; or would you rather have the security and peace of mind of knowing that the Dr. who would be undertaking the work was a member of a licensed body, was regularly inspected and regulated and was providing expert training to those operating within his practice.”

Obviously we all know which option we’d choose, and to be frank is the right option.

However, I am becoming more and more increasingly alarmed at the number of directors’, accountants’ and business advisors’ who have sought advice from the “dark-side”; that is, the phenomenon of the unregulated advisor; and/or those who have deferred
seeking advice to the very last stage when the wolves are at the door simply clinging on to the hope that things would simply get better.

When I discuss this very issue with local accountants, I often also pose this question to them:

If you were to advise your own client whether it was better to use a qualified/regulated accountant or a non-regulated/non-qualified accountant what would your answer to them be?”

As you can imagine the response received is always the former, as they too value the importance of regulation and being supported by a firm that operates under the umbrella of a professional licensing body.

With any service provided within the financial services arena, I always stress to clients the sometimes overlooked importance of this very point. Whilst the unregulated advice may sometimes, in the loosest sense, be exemplary and correct, there is always a risk that things may not work out as intended or anticipated. In these circumstances where do you, or do you advise your client to go to, to rectify the position or make a complaint to follow up any grievances?

No doubt your once, friendly, unregulated advisor, or in the instance of the backstreet Doctor, has probably already shut up shop and opened a similar venture in a backstreet in a new part of town. Whereas, by seeking advice from a regulated professional, there will always be recourse on the advice sought. Similarly, the earlier you speak to a professional advisor the more likely it is that a
turnaround can be achieved and that there is a significantly improved position in terms of the likelihood of a rescue or better result for all interested parties involved.

So when reviewing or assessing a company’s performance or financial health, either through introspection or when looking at the outside market, please consider whether the company subject to the review is demonstrating any of the following, but not limited to, symptoms:

1. The Company is continually loss making;
2. There are poor relationships with the existing bank and/or they are unable to secure additional lending;
3. No or limited access to alternative sources of finance;
4. Suppliers are placing the debtor on cash on delivery terms of trade;
5. Creditor days have extended beyond the usual terms of trade; or payment methods are being changed (the issuance of post-dated cheques for instance);
6. Payments are being made to creditors of rounded sums, which are irreconcilable to specific invoiced amounts;
7. Inability to produce timely and accurate financial information to display the Company’s trading performance and/or they are unable to make reliable forecasts;
8. The Company receives Solicitor letters, summonses, judgements or warrants.

The key to any business survival is not only about receiving the right advice, from a qualified professional, but it is also about receiving that advice at the right stage in the process, tailored to the individuals concerned.

So if you are a director of a company experiencing any of the above symptoms; or if you are an accountant or business advisor and have concerns about your client’s financial health; it is far better to seek professional advice in an open and friendly manner at an early stage so that every option can be explored.

The alternative to this is to bury your head in the sand and wait for the dark lord to appear, and trust me he will come knocking at your door… you have been forewarned.

In the event that you wish to discuss any aspect of the above article, or in fact you have a client who may benefit from an initial, free, without prejudice discussion, please call Anthony Ford on 01202 830 002 who will be more than happy to deal with your enquiry.