Four years ago, the Recruitment Business contacted us (*name has been changed) after building up large debts with HMRC and their landlord.
Running any kind of business comes with its own unique set of challenges, but there’s a common issue that unites many SMEs. That issue is cash flow management. All too often, there’s an imbalance between what’s coming in and what’s going out. When the scales tip the wrong way, owners face a tough choice between keeping a roof over their own head and paying staff, or paying business debts such as VAT, PAYE and property rental or lease fees.
This was the case for the Recruitment Business. For all outward appearances, the business was thriving. The two directors of the business seemed to be thriving, with their own homes, a supercar parked in the driveway and very comfortable lifestyles.
Behind the scenes, things were not all as they seemed. The owners were overspending on their own lifestyles, at the expense of the business. They weren’t keeping track of what was owed and had no control over their cash flow, leading to the accumulation of a large amount of debt.
The debt breakdown
The Recruitment Business believed each director had a £200,000 director loan account with around £500,000 owed to HMRC. With HMRC aggressively pursing payment, the Recruitment Business appointed Boardroom Punks to devise and execute a business rescue plan.
Our first order of business was to build up a clear picture of the business’ finances. After reviewing the accounts, we were able to determine that each director had a business loan account of £300,000, rather than the £200,000 they had estimated. There was also a £750,000 debt owed to HMRC which comprised VAT and missed PAYE payments, along with a £100,000 overdue rent bill and a £30,000 unpaid utility bill.
What happened next
Our Punks restructured the business so that it could begin a new chapter on a sounder financial footing. We were able to settle the £300,000 director loan accounts for £30,000 each and resolved the HMRC issue by negotiating with them. Our sister company, Punk Business Loans loaned the Recruitment Business £190,000.
There was no interruption to the business during this period, allowing the recruitment service to continue filling vacancies for its clients and placing candidates in new roles.
Our business restructuring process was successful and effectively gave the Recruitment Business a blank page to move forward into a new chapter. Four years later, the business is still going strong.
