News

Warning signs, what to look out for

Restructuring and Insolvency
1
July
2022
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At a time when pressures are mounting for businesses, it is important to keep an eye on key stress factors which could effect liquidity. Below is an overview of what to look out for. The earlier signs of distress are identified, the better.

Internal Issues

  • Overstaffing
  • Lack of management information and late providing information to accountants/auditors
  • No business plan (cash flow forecasts)
  • Large intercompany balances
  • Directors Loan Accounts

External Issues

Customers

  • Increase/decrease in debtor days
  • Round sum payments on account
  • Over-reliance on small number of customers

Suppliers

  • Numerous new suppliers
  • CCJs
  • Increased creditor days
  • Not paying non-trade creditors (particularly accountants)

Banking arrangements

  • Expensive finance (peer to peer etc.)
  • Facility fully utilised
  • Returned direct debits
  • Breakdown in relationship with funder

HM Revenue & Customs

  • RTI PAYE & VAT returns not submitted
  • VAT surcharges (2%, 5%, 10%, 15%)
  • Historic tax planning schemes
  • Pre/post-Covid arrears not being addressed
  • High ratio of HMRC debt to turnover
  • Regular payments to HMRC in respect of arrears without a formal plan in place

Solutions

  • Engage advisers earlier the better
  • IBR/Navigator review
  • Critical cash flow management
  • Time to Pay arrangement with HMRC
  • RPO loan scheme to help fund redundancies
  • Debtor review
  • Recovery plan, refinance or insolvency event

If you have any questions or would like advice, get in touch on [email protected].

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