Often we meet directors at a stage when it is just too late to save their business, which is as big a frustration for the directors as it is ourselves.
This frustration stems from the fact that more often than not, the business in question could have been saved, at least in one form or another – if the directors had reached out for help sooner.
The most common comments we receive from directors when they meet with us, is that:
- They believe meeting with us or other insolvency practitioners means that the company will be wound up; or
- They simply believed that things would turn around and get better.
These two common misconceptions are sometimes the biggest hurdle for us, as insolvency practitioners, to attempt to overcome. Yes, we are ‘insolvency practitioners’, but we also specialise in restructuring and turnaround.
When we meet with directors, the last option on the table for us is the winding up of a company.
We will firstly look at all viable options which enable a business to trade-on and out of their financial distress, so as to secure their long-term viability. Winding up is only considered if there are no viable alternatives available.
If you or your client’s company is in financial distress or you are concerned about its financial position, below are some vital steps we recommend being taken to ensure the best outcome for the company:
- Do not put your head in the sand – This is the most important step we will list. Directors or advisors should reach out for help as early as possible, so as to ensure that the company is afforded the best possible chance at survival. It may sound clichéd, but this is often the difference between the life and death of a company.
- Meet with your advisor or accountant – This should be your first port of call when seeking help or advice surrounding the financial viability of your company.
Meeting with your advisor or accountant allows for a thorough review by a specialist who already knows your business. They will be able to identify any indicators of financial distress within your company.
- Meet with HLB Mann Judd Insolvency WA – If your advisor or accountant has identified any indicators of financial distress within your company, they should arrange an obligation-free meeting with our office. As mentioned earlier, a meeting with our team is not undertaken with the intention to wind a company up, rather it is a meeting to assess the options available to a company to combat and overcome the financial distress it may currently find itself in. Winding up a company is the last resort.
When you meet with our team, we will assess a company’s financial position by reviewing:
- any externally prepared financials for the company;
- the management accounts of the company (not limited to cash-flow forecasts, aged payables, aged receivables, etc.);
- the company’s tax position
- the company’s debt position with institutional creditors, such as banks and financiers;
- the company’s revenue and cost generating units; and
- many other factors that may directly (and indirectly) relate to your business in particular.
This meeting is used to determine the long-term viability of a company and, on many occasions, we have met with directors and simply told them that we are not required, as the company is not a candidate for external administration, instead, the company simply needs some simple refinements to guarantee is long-term viability.
These refinements can sometimes be undertaken by an accountant or advisor; and if not, HLB Mann Judd Insolvency WA can utilise its network to put directors in contact with the most appropriate professional, be it financiers, lawyers, business brokers or private equity funders.
If you are concerned about the financial viability of you or your client’s company, please contact our office to arrange an obligation-free meeting to assess the company’s financial position and the options available to it.
About the author
Benjamin Mitchell is a Senior Insolvency Accountant at HLB Mann Judd Insolvency WA. Benjamin assists the Partners with the many Corporate and Personal insolvency appointments managed by the HLB Insolvency team.
If you have any queries about insolvency matters, please feel free to contact the team on 08 9215 7900.