The Domino Effect

Steve ElliottPosted 7 April 2015 By Steve Elliott, Business Recovery and Insolvency Partner In Business Recovery & Insolvency

A design build contractor and manufacturer with operations in Sheffield collapsed last week and the majority of the 139 strong work-force have been sent home. The insolvency earlier this month of one of the company’s key customers, GB Building Solutions Ltd, had left a significant hole in the company's cash flow, such that there was little option but to appoint administrators.

Susceptibility to the failure (or loss) of a major customer seems to have increased markedly and our experience in the market-place shows that cash is much tighter now than ever. A sudden down-turn in sales for a couple of months can similarly  leave businesses with an unexpected cash-flow “black hole” which would not have been so challenging in earlier years when, now depleted,  reserves were higher.

All the indicators are that the economy is improving and those reserves will come under additional pressures from the cost of re-tooling and re-stocking. With inflation at around zero and all the problems that come with that, it could be a cash-flow forecaster’s “perfect storm”!

The availability of good management information and proper credit control is key to countering these challenging times. Good financial advice and timely action are even more essential and I always say that you can “rent” that expertise now if you can’t afford to have it “in house” full time!

To discuss this or anything else contact Steve Elliott on 01793 818300 or send him an email.

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