Small Business Administration

A recent report by the Association of Chartered Certified Accountants (ACCA) states that the first quarter of 2009 indicated a slight stabilising of both the SME sector’s finances and overdraft lending, with small business clients increasing their demand for unsecured lending.

There is evidence that SMEs continue to fare better than larger businesses, but the report goes on to say that this optimism is simply “the end of the panic”, not the end of the recession. It is evident that the recession is continuing, albeit at a slower and less dramatic pace than first predicted.

Small business administration is still a very real problem and it is vital that directors keep a close eye on cashflow and balance sheets to ensure that their business finances are in hand. For example, recent research carried out by Close Invoice Finance, part of the Close Brothers merchant banking group, indicated that more than 350,000 SMEs rely purely on one customer to make up over 75% of their annual turnover. It doesn’t take a genius to deduce that should that customer withhold or default on one or more payments, then the company could face significant financial difficulties. In addition, more than three in five SMEs had no insurance to protect themselves from customer default.

The warning signs of small business administration

There are some steps you can take to best protect your firm from becoming yet another small business administration statistic. Equally as important, however, is recognising when you are actually in financial difficulty.

Warning signs that your business is in real trouble include:

  • Inability to pay debts
Bills arrive in the office but you’re unable to pay them or at best, to match your creditors’ terms.
  • Balance sheet inbalance
You’ve got more going out than the total value of your current assets.
  • Legal intervention
One of your creditors have applied for a County Court Judgement against you for non-payment of invoices.

Remember that one of these alone may give you a distorted view of reality, so make sure you check all three to gain a true, accurate perspective of your company’s financial situation. It is a director’s responsibility to ensure that creditors are paid to the best of their ability. Failure to act upon this can result in a hefty fine or up to 15 years disqualification from running a business.

Taking action

To prevent legal action at the outset, you should contact creditors immediately, once you have reached the stage of unbalanced finances. Offer to make a formal payment plan with them if you can, to pay off at least part or preferably the full amount of what is owed.

If this is not possible, there can be no other alternative than to apply to the court for an interim order, giving details of the qualified SME insolvency practitioner which you have appointed.

How Touch Financial Can Help

As the UK’s leading online invoice finance broker, we are experts in dealing with SME insolvency. Our team of experts jointly have decades of experience behind them and possess the skills and knowledge to identify any areas where you could make significant savings, perhaps secure additional lending from our panel of carefully selected lenders – and potentially save you from recovery proceedings.

Speak with one of our advisors today by call 0845 3889725 or complete one of our online quote forms.

Remember, by contacting Touch Financial, you are taking the first step toward recognising that your company is in financial difficulty. We will help you assess the reality and extent of the situation and advise you with regards to your legal obligations and valid options.

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