Cash flow issues are one of the main sources of stress for small businesses. Research shows that 72% of SMEs in the UK have experienced cash flow issues within the last 12 months. Because SMEs tend to have smaller cash reserves, they’re more vulnerable to issues such as late payments and price increases.
No sector is immune. Businesses with long payment terms such as 60 or 90 days, and those who need to make a significant investment in equipment or materials are especially at risk – as our client recently discovered.
A precision engineering firm, our client has a high degree of expertise and a team of around 40 staff. Based in Aberdeenshire, they work with a range of clients and serve a variety of industries. As a highly specialist service, the business is well-respected with a great reputation and excellent client relationships. It’s a busy firm with a constant supply of work.
However, it recently found itself in a very tight spot after one of its key clients failed to pay their invoices for goods and services provided. With the client company facing their own cash flow issues, the ripple effect put our client’s survival in jeopardy. Not only were they left holding the bill for the works already completed, but they were also left with a large cash shortfall.
Such an unexpected blow meant that the business quickly fell into crisis mode. The large hole in cash flow had a huge knock-on effect – the funds weren’t in the bank to pay suppliers, or the VAT bill and debts were racking up fast. With a large payroll bill also hitting monthly, it seemed increasingly likely our client would have to begin considering unwanted redundancies.
How Boardroom Punks was able to help
Having listened to the circumstances leading to the cash flow issues and unpaid VAT bill, it was clear that the business needed help to get back on its feet. With an injection of cash to clear its debts, we were confident that the engineering firm could recover its good standing and continue to prosper.
Although the firm had an overdraft facility, it wasn’t enough to clear the supplier and HMRC debts. We provided a short-term bridging loan which could be used to pay off all liabilities and set the business back on a positive footing. This provided the breathing space needed to adjust and recover.
We’re delighted to say that the engineering firm was able to retain every member of staff and redundancies are no longer necessary. The firm was able to win new clients and today is thriving once again.
If you’ve been impacted by late payments, we can help. Call us now to speak to a business rescue specialist.
