Phil MeekinView Profile
Why it’s time for the insolvency profession to have a makeover.
The term ‘business recovery’ conjures up different mental pictures to different people. And it is not surprising.
Ask people what an insolvency practitioner is there for and I would expect the majority to answer; ‘to deal with a business once it has gone bust’. This is why the insolvency profession is in urgent need of a drastic image makeover.
What do you do if you have a toothache? You think of a dentist. What do you do if you decide to buy a diamond ring? You think of a jeweller. But if you are facing financial problems you don’t necessarily think: ‘I need an insolvency practitioner’. Instead, there is a tendency – where money is concerned – to put things off until very few options are available.
Burying’ a business is generally the last resort – if we can preserve and salvage a business we will
Many business owners – and indeed individuals – make the same mistake when faced with financial troubles: they bury their head in the sand. They might choose to discuss their problems with friends who will give them well-meaning advice: but not necessarily the right advice. When things get very desperate they might decide they have no option but to see a solicitor or accountant. There is then a very good chance they’ll be advised to consult an insolvency practitioner. Unfortunately, by this stage, it is often too late to save the business.
If you are a company director and you see financial problems on the horizon, the sooner you do something about them the more chance your business has of surviving.
It might be that you need to arrange finance or attract investors. Of course, this isn’t always the answer; borrowing money might not be the best strategy for your business if the root cause of the problem has not been identified. Doing so could result in ‘throwing good money after bad’.
It is sometimes the case that businesses run into financial difficulties even when the core business is sound. It may be that certain operations within the business are simply not viable. This can have a knock-on effect on the company as a whole. Unexpected market conditions, availability of finance or changes in the economy can all trigger problems.
Or it could be the case that there has been a one-off glitch that has dramatically affected cash-flow. There could have been a delay in the receipt of payment for a large contract, for example, or an incident could have occurred which has impacted on the delivery of a job. To resolve the issue the company may simply need to ‘buy-time’ and work its way out of the problems.
Insolvency practitioners can help address all of these issues and more – provided they are consulted early enough. If a company is struggling financially and there is a way out of it, an insolvency practitioner will find it.
One of the most well-known activities of an insolvency practitioner is administration. Yes, this is one of the tools of the industry, but there are many others.
Administration is a relatively temporary arrangement where an insolvency practitioner is appointed as officer of the court to take control of the company. The insolvency practitioner will then assess the viability of the business to see if part or all of it can be saved. While the company is in administration it is protected, so no on-going or new action can be taken against it by creditors or bailiffs.
Insolvency practitioners also deal with refinancing and restructure. At Wilson Field we have an extensive network of contacts and investors so there is a variety of options. ‘Burying’ a business is generally the last resort – if we can preserve and salvage a business we will, but that is largely dependent on business owners changing the way they think of the insolvency profession and consulting us as a first option, not a last resort.