How to deal with a cashflow emergency

How to deal with a cashflow emergency Portland Business Support & Advice The way forward, made brighter A Guidance Paper by CashsolvTM is a Portlan...
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How to deal with a cashflow emergency

Portland Business Support & Advice The way forward, made brighter

A Guidance Paper by

CashsolvTM is a Portland Business Support & Advice service

Contents

Expertise and Innovation

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Identifying a cashflow problem

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How to deal with a cashflow emergency

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What is cashflow How it can go wrong The five steps to dealing with a cashflow emergency Self help - Identifying your working capital requirement Doing more with less Trust Cashsolv™ to help you

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How Cashsolv™ can help

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24hr Emergency Loans New Funding Creditor Cashplan™ HMRC Time-To-Pay Intelligent Debt Collection Building a better future

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1

Introduction

Expertise and Innovation Developing unique cashflow solutions to benefit you We all hear time and time again that cashflow is the lifeblood of business, and we all know it is true, but when a company hits a cashflow problem, what services or products are available to help? What is available to take away the time-wasting and energy-sapping telephone calls from creditors so that you can concentrate on sorting out the underlying business problem? Traditionally, borrowing more money is one answer. However, that is difficult, unless you have significant assets to offer as security. Alternatively, you could end up in an insolvency procedure such as Administration and maybe go through a Prepack, but that is not always an attractive option. The fact is that there is no single answer and it all very much depends on individual circumstances as to what is right in each situation and for you, and that is why we have formed Cashsolv™. Cashsolv™ offers an innovative combination of being able to offer new funding through emergency loans and asset-based lending, as well uniquely, being able to take pressure away by reorganising your existing debts, all without a value-destroying insolvency procedure. Previously, the required skills and resources have not been available to anyone who is not an expert in managing financial distress, but through Cashsolv™ they are now. Our priority is to provide honest, straightforward business support and advice to you, help you to overcome cashflow problems so that your business can go on to not only survive but also to prosper.

Carl Faulds Managing Director

Having spent 15 years as a very busy insolvency practitioner, I often asked myself, if I were in my client’s situation what would I do?

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Identifying a cashflow problem When a business suffers trading losses or cashflow problems, those running the business spend an increasing amount of their time fire fighting problems and less time focusing on the way out of the problem. This can escalate, if it is not addressed ed quickly.

Do you recognise any of the following ng symptoms?

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Up to overdraft limit – no headroom room / returned payments?

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nth Stretch to pay salaries each month

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Trade creditor arrears

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-Pay HMRC arrears (RTI!) – Time-To-Pay

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Rent arrears

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rviving day to day No working capital ‘buffer’ – surviving

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Negative working capital on balance sheet – over-geared / losses?

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Lack of funds for remedial action (redundancies / premises relocation)

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Lack of profitability – insufficient to support owner / manager’s lifestyle

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Unable to pay for professional advice

This guide is designed to help business owners and managers overcome cashflow problems to ensure that a short term problem does not put the business at risk of failure. Cashsolv™ is a Portland Business Support & Advice service with huge amounts of experience in helping relieve these pressures and helping to get you focused on the way out of the downward spiral. From offices in London, Hampshire and Dorset, we provide our services to clients across Southern England and further afield when required. All of our directors and senior staff are highly skilled professionals who are willing to roll up their sleeves and provide a hands-on service to our clients.

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How to deal with a cashflow emergency What is cashflow? Simply put, matching the cash coming into the business to the cash going out of the business. This is different from profits or losses, as cashflow is in real time. If you do some work, but don’t get paid for three months, you may have made a profit when you completed the work, but the cash has yet to be received. The problem is when there isn’t enough cash in the business to cover the lag between the time you have to pay your suppliers and employees and the other costs, and the time it takes to collect payment from your customers. The amount of cash required to cover this lag is known as the ‘working capital’ requirement.

How it can go wrong In normal day to day circumstances, there may be sufficient working capital to keep the business operating, particularly if it is profitable and the profits are turned in due course into additional cash in the business. However, things sometimes go wrong or even very well and both can create a cashflow problem. When things go wrong, such as suffering a bad debt, having a downturn in sales, a machine breaks down, an order is delayed, can all mean that the amount of cash in the business is reduced, but the outgoings still mount up and need to be paid – leading to a shortage of available cash and a cashflow problem. Conversely, when things go very well, you obtain a large new order, need to buy a new machine to add capacity, employ more staff to meet demand, all these things can increase the amount of money going out of the business, before they increase the money coming into the business. This results in a requirement for more working capital, and when a business grows faster than the amount of working capital that is available to match the growth, it is known as ‘overtrading’ and can also lead to a cashflow problem. Sooner or later, most businesses will find themselves at some point in the life of the business in a situation where you lack the cash to pay your bills. This doesn’t mean you’re a failure as a businessperson – you’re a normal entrepreneur who can’t perfectly predict the future Our services are designed to help businesses deal with cashflow problems, to plug the gaps, so that the situation doesn’t deteriorate and lead to a business failure.

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The five steps to dealing with a cashflow emergency The extent of the immediate problem determines how quickly you pass through the steps. 1.

Identify immediate threats to the business

2.

Put in place short term protective strategy

3.

Identify cashflow requirement

4.

Identify and address underlying problem

5.

Put in place longer term strategy

Immediate threats to the business Identify what will stop the business dead in its tracks unless addressed immediately? Some payments such as wages and salaries, or to obtain delivery of key goods, must be paid on a due date and non payment can be disastrous for the business. A quick analysis of these issues will identify the priorities.

Put in place a short term strategy This is the emergency triage stage and the purpose is to buy some time to go through the other stages. We have a great deal of experience in how to overcome these short term issues, and you will be surprised as to what can be achieved through our constructive approach.

Identify cashflow requirement A cashflow forecast is important to understand the extent of the cash shortfall. All businesses need to know how much cash they need to operate efficiently. A lack of cash can significantly reduce profitability, as resource is spent juggling cashflow, rather than maximising profits

Identify and address underlying problem A growing business can easily run out of cash, an unprofitable business almost certainly will, what is most important is to create a business that has sufficient cash to maximise the opportunity for profit and the level of profits is proportionate to the amount of cash invested. An experienced outside perspective can be invaluable in helping to see the best way forward for a business. Often we find that business owners become so embroiled in the day to day operations that they loose the ability to truly assess their business. We can provide the insight to help them refocus on building a business that matches what they want to achieve.

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Put in place a longer term strategy Running a business is a marathon not a sprint. Overnight success does not normally happen overnight. A longer term plan and strategy is invaluable to long term success and helps avoid future cashflow problems as well as maximising profit.

Self help - Identifying your working capital requirement You need to understand your cash position by preparing a cashflow forecast. This will help you to identify your working capital requirement and quantify any shortfall that unless addressed could put your business in jeopardy. We would normally recommend that you prepare a forecast for at least six months. The first two months should be done on a weekly basis and the following four months on a monthly basis. Start by setting up a simple spreadsheet with the columns headed up week 1, week two etc. The first row should be the opening cash balance, at the beginning of each week or month, which apart from the first week is the C–D amount from the end of the previous week or month. The rows below set out the sources of income from various sources in as much detail as possible. In the process, you will wind up gathering information from salespeople, service representatives, collections, credit workers and your finance department. In all cases, you’ll be asking the same question: How much cash in the form of customer payments, interest earnings, service fees, partial collections of bad debts, and other sources are we going to get in, and when? Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Month 3

Month 4

Opening cash balance A

Income Customer 1 Customer 2

Total income B

Cash balance A+B=C

The second part of making accurate cash flow projections is detailed knowledge of amounts and dates of upcoming cash outlays. That means not only knowing when each penny will be spent, but on what. Have a line item on your projection for every significant outlay, including salaries and wages, landlord rent, stock suppliers (when purchased for cash or when payment due if on credit), taxes when payable, utilities, equipment purchased for cash, professional fees, office supplies, debt payments, advertising, vehicle and equipment maintenance and fuel, and cash dividends. cont.

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Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Month Month 3 4

Outgoings

Salaries and Wages Landlord Supplier 1 Supplier 2 PAYE / VAT Utilities

Total Outgoings D

Once you have worked out all of your income and outgoings, you can work out the difference between the two, and this will show you your net cashflow for the period. By carrying forward the closing balance in week 1 to become the opening balance in week two, and so on. It will show you the peaks and troughs over the total period.

Net Cashflow C-D

If your net cash balance is negative, you need access to more funding to meet cover the negative balance. If the net cash balance fluctuates between a negative and a positive figure, the largest negative figure is your cashflow funding requirement. Whatever your forecast shows, the information is very important to help you run your business.

Doing more with less It is easy to talk about solving cashflow problems by saying introduce more money. The problem with that is it does not address why the cashflow problem arose and whether it is simply a sign of a bigger problem looming. It is also the case that introducing more money usually means borrowing more money and that is not always an option, particularly in an emergency. This is where doing more with less can be the answer. We can help businesses overcome cashflow problems, because we have a range of solutions and key business skills. We are skilled at quickly identifying the underlying issues. We can provide an emergency loan, if appropriate to provide a short term lifeline whilst we set about using the available cashflow more effectively, which we call doing more with less. We are able to use our skills and knowledge of business, the law, and creditor behaviour to maximise the value obtained from the cash available. As well as possibly introducing new funding, we can also negotiate with creditors, both suppliers HMRC on your behalf. We can also use our intelligent debt collection skills to speed up receipt of the money due to you. When we combine all of these skills and factors to improve your cashflow, we will be doing more with less.

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Trust Cashsolv to help you TM

There have previously been limited sources of help available for companies with cashflow problems. Larger companies can seek to achieve a formal turnaround. This, however, usually involves either a change in management through the appointing of new executives, or at least the appointment of a full-time turnaround expert, who is charged with the responsibility of implementing a ‘turnaround’ plan. As these people have specialist skills, they are often beyond the reach of most small and “You guys have got a problem!” medium companies, and anyway it is very difficult to introduce an external executive to a = involves management change, typical owner-managed business. typically only available

‘Turnaround’ to large companies

This approach is therefore more suited to larger organisations that have greater resources.

As an alternative to a ‘turnaround’, Insolvency Practitioners are able to offer ‘business recovery’ services. This usually involves some form of insolvency process. While in many cases this can address the financial position, either through some form of debt write-off by creditors, or the sale of the business to a third party, it rarely addresses the underlying causes of the financial difficulties.

Insolvency practitioners

Cashsolv™

Restructuring

Advice & Support

Corporate recovery

Cashflow Solutions

Insolvency

Business Recovery

Cashsolv™ services are all about helping businesses resolve their financial problems in a way that causes the minimum of disruption to the business and will give the best chance of success in the future.

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How Cashsolv can help TM

A Unique Package Unique and confidential cashflow solutions for businesses under pressure We solve cashflow problems; it’s as simple as that. We provide unique business finance and business funding options and resources, on a confidential basis, to directors of companies who need help and advice to overcome their company’s cashflow problems.

24hr Emergency Loans Borrow from £20,000 to £250,000, within 24 hours with an emergency business loan.

New Funding From lender negotiations to asset-based finance and business loans.

Creditor CashplanTM Get your trade creditors under control, so you can concentrate on business.

HMRC Time-To-Pay Worried about Tax, PAYE or VAT arrears? Spread repayments with an HMRC-approved agreement.

Debt Collection Apply an intelligent approach to debt collecting and getting paid by your customers.

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Cashsolv Services ~ 1 TM

24hr Emergency Loans 24hr Emergency Loans from £20,000 to £250,000 Cash in your bank account within 24 hours Sometimes things don’t go to plan. A customer doesn’t pay on time, a loan takes longer than expected to come through, or a deal is delayed. A fast, short-term business loan could be the answer.

Is an emergency loan the right solution for my business? We are not pawnbrokers or loan sharks. We will provide an emergency business loan to help deal with an immediate cashflow problem where short-term credit is required and we can see that the underlying business is fundamentally sound. We typically require repayment within one month, although longer-term finance is also available.

Available to businesses where… Limited company (not sole trader / partnership) Fundamentally viable Possibly part of a wider package of measures Not ‘robbing Peter to pay Paul’ Personal Guarantee is required No history of continued losses Clear ability to repay

Costs Our standard rates are 10% of the loan advance repayable within one month. This cost is all inclusive with no added extras. Longer term loans and costs are subject to circumstances.

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Cashsolv Services ~ 2 TM

New Funding Overcoming cashflow problems by introducing new sources of asset finance Where there is more than a short-term funding requirement, we can help you overcome your immediate cashflow problems and get the right longer-term finance in place. Funding is often about confidence, and even a short-term cashflow problem can deny access to longer-term finance. We have relationships with lenders who will take a different view.

What sort of funding is available to my business? We deal principally with asset-based finance. We have a panel of lenders that we have chosen to work with as we believe they are willing to look beyond short-term problems and more at the bigger picture. They are also looking for longer-term relationships, so you will not be jumping out of the frying pan and into the fire.

New Funding ~ provides businesses with… Asset-based lending (not equity/unsecured loans) Long-term picture Reputable lenders Relationship-based service Can grow with the business Possibility of overcoming a short-term problem Government Enterprise Guarantee Scheme option

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Cashsolv Services ~ 3 TM

Creditor CashplanTM Confidential, immediate relief from creditor pressure ~ allowing you to concentrate on your business A unique way to make your trade debts affordable Directors tell us that when there is a cashflow problem, they end up spending most of their day trying to placate chasing creditors or even avoiding answering the phone. This becomes a vicious circle leading to increased stress, sleepless nights and less and less productive time working on the business.

Can a Creditor Cashplan™ solve my problem? If by us taking the creditor pressure off your shoulders you will be able to get back to running your business profitably, then yes. Our unique Creditor Cashplan™ enables you to identify the older creditors that are hassling you and pay them over a 10 month period. We act as an intermediary, so they deal with us rather than you. This enables you to concentrate on running the business. The plan is confidential; you do not need to tell anyone other than those we are dealing with on your behalf.

A valuable service when… Trade creditors are hassling you for payment Directors need to focus on running the business Clients don’t want to include current suppliers Clients don’t want to involve banks Confidentiality is important Clients wish to avoid a formal insolvency Dramatically improved cashflow is required

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Cashsolv Services ~ 4 TM

HMRC Time-To-Pay Paying HMRC Tax Debts a problem? We can help When times are hard, HMRC will agree to payment of tax arrears by instalments HMRC will agree to allow you to pay your tax arrears over extended periods, typically up to 12 months, provided you can justify why you cannot or haven’t paid on the due date and provided you are able to pay future tax debts on time. This is called a ‘Time-To-Pay Agreement’.

Is a ‘HMRC Time-To-Pay agreement’ (TTP) right for me? To be eligible to enter into a TTP agreement you will have to be able to satisfy HMRC that you have a good reason for not having paid on time or why you’re not going to be able to pay on time. In addition to dealing with arrears, if you know in advance that you can’t make a future payment, you can discuss payment terms before the debt is due. In considering a TTP agreement, HMRC will review your previous compliance record and what you have to say about being able to pay the arrears over the period proposed. Dealing with HMRC can be complicated, but we deal with them every day and understand how to put your best case forward.

An agreement to support businesses… Includes all taxes Includes VAT Arrears payable over up to 12 months Helps to manage cashflow Avoids bailiffs and legal proceedings Avoids insolvency process Requires future debts to be paid on time

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Cashsolv Services ~ 5 TM

Debt Collection Intelligent, cost-effective debt collection - with clout Immediate action within 24 hours by experienced legal experts Getting paid by your customers is crucial to your cashflow, and not getting paid may put you out of business. Nobody wants to upset a repeat customer for fear of losing future business, which is why intelligent debt collection makes sense. Rather than sending standard letters that can not only offend your customers but also are pretty ineffective, we tailor our service to your needs, your style and your customers. Ultimately, however, a customer who doesn’t pay isn’t a sale, they are a cost.

Is debt collection right for me? If more than 50% of your debt is even slightly overdue, then yes, or if you have one stubborn customer who is simply refusing to pay what is owed, then yes. In the short-term, a proactive approach to recovering the overdue debt will help with your immediate cashflow issues. Once that is underway, a review of your credit control process may help avoid a further build-up of outstanding debtors. Alternatively, depending on your industry and customer profile, you may need continuing support for when debts reach a certain age.

A service that helps businesses by providing… An immediate cash injection Intelligent debt collection Sensitive to customer relationships Specialist trained legal experts Immediate action within 24 hours No win no fee

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Building a better future When faced with cashflow problems and with business survival possibly at stake, it’s hard to recall the goals you set when you first decided to ‘go into business’. You certainly didn’t go into business to have sleepless nights worrying about the future, possibly feeling lonely and trapped, with no light at the end of the tunnel? In those early days, it was optimism and a hope for a better quality of life that helped you make the decision to set up your own business. One of the key steps in dealing with business problems is to remind yourself of your early goals and rekindle the passion and energy that you had on your first day, knowing it was going to be hard work, but feeling ‘up for the fight’. To be able to get back to that state of mind, you may need our help to show you the way forward. We advise 100’s of businesses each year and every one is personal to the owner, every business is unique and captures the dreams, the energy and hard work of the owner. Our role is to make sure those dreams aren’t shattered, and the energy and hard work isn’t wasted.

The way forward, made brighter For a FREE, CONFIDENTIAL, NO OBLIGATION, discussion about how we might be able to make your way forward brighter, call or email us now. Please don’t leave it too late.

Call your cashflow expert now on 01489 550 440 Email [email protected] For more information visit www.cashsolv.co.uk

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This document explains the relevant position only in general terms and omits details less commonly experienced for the sake of brevity. It is not intended to be used as formal advice about your actual situation, for which you should consult us specifically and not rely upon this document. Portland would be pleased to advise you formally and you should contact one of the directors listed on the website at www.portfbs.co.uk to arrange this or telephone our main switchboard on 01489 550440. Portland regrets it is unable to accept any responsibility to anybody who seeks to rely on this document. © Portland Business & Financial Solutions Limited, Eagle Point, Little Park Farm Road, Segensworth, Fareham, Hampshire PO15 5TD

CashsolvTM is a Portland Business Support & Advice service

South East Office Eagle Point, Little Park Farm Road, Segensworth, Fareham, Hampshire PO15 5TD Tel: 01489 550 440 Fax: 01489 550 499

South West Office The Outlook, Ling Road, Poole, Dorset BH12 4PY Tel: 01202 712 810 Fax: 01202 712 818

Email: [email protected] | Web: www.cashsolv.co.uk

London Office 14 Basil Street, London SW3 1AJ Tel: 020 7925 2651 Fax: 020 7925 2652