It has recently been reported that an award-winning wedding caterer in Greater Manchester, whose renowned chef has served food to dignitaries such as Vladimir Putin, Bill Clinton, Bill Gates, Michael Schumacher and Morgan Freeman, has been placed into liquidation. As a result of the company’s insolvency, all staff have been made redundant. The company was incorporated in 2010 and had enjoyed success, including Caterer of the Year Award at the Asian Wedding Awards 2014, until finances were hit and the company went into insolvency as customers decided against holding elaborate functions in favour of smaller events. The company found itself competing with budget rivals who catered for the smaller and cheaper functions.
Plan, have a backup, and a backup plan for the backup
The insolvency of this company demonstrates how market and consumer habits can change within a relatively short period of time (in this case people opting for smaller and less elaborate functions) and why it is important to have a plan and be prepared to adapt to market trends. No company can afford to sit on its laurels and if it does there will always be competitors who will take advantage.
I often speak to directors who tell me that they can see that market trends are changing but they do not react quickly enough. As a result cash flow becomes an issue which leads to suppliers not being paid on time and debts mounting to HM Revenue & Customs in respect of unpaid PAYE, NIC and VAT. It is of course important to tackle being insolvent before HMRC hits for a number of reasons. If market forces change, you need to be proactive and make changes before insolvency hits. Be mindful of your market place and if sales begin to decline, undertake some market research, check out your competition, ask your customers why they are not buying from you. If you cannot replace the loss of turnover immediately, then consider whether you can reduce overheads, whether permanently or temporarily. Staff costs are usually the largest cost of a business so review whether there is scope to make staff redundancies or reduce working hours. It is important to have a cash buffer for the leaner periods and to not sit back and hope that the good times will return because they may not.
How we can help with cashflow problems
The earlier you react to changes in market trends, the better chance you will have of saving your company rather than it end up in some form of insolvency.
At Cashsolv, we have a number of years of experience helping companies with cashflow problems. Whether you need a business loan, help negotiating payment terms with creditors or more time to clear HMRC tax arrears, we have the solution that will help get your business back on track.