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BRI Business Recovery and Insolvency

We are an independent company of insolvency practitioners committed to finding the right solutions for businesses and individuals in financial difficulty

Make sure you can see the wood for the trees

Make sure you can see the wood for the trees

2 May 2017:  Alan Limb from BRI’s Southampton Office reminds us of the need to understand financial information before acting on it.

I was recently asked to meet the directors of a company. They were concerned about the future of their business because they had lost a contract that comprised 25% of their turnover. They feared that insolvency was inevitable. I asked them to have available current information regarding the company’s finances so we could discuss things fully.

When I arrived, the directors handed me the details that their bookkeeper had produced from the company’s Sage system. It was up to date but not in a format that the directors could interpret. However, after a short conversation some key facts emerged:

  • The lost contract required a high level of management time each day to comply with relevant legislation;
  • The two long serving direct employees who worked on the contract had transferred under TUPE to the competitor who had won it. Therefore the company had avoided any redundancy costs;
  • One of the employees required daily management by a director to ensure that he arrived for work and performed his duties;
  • The company had purchased expensive fixed assets for the contract that were now surplus to requirements. These could be sold which would reduce finance/insurance costs and generate cash to be reinvested in the business;

Consequently, the loss of the contract was probably an opportunity for the company rather than a threat. Turnover had fallen but profit would increase overall. It also gave the directors time to focus on managing the business more effectively in future. 

If you have a client whose business is struggling due to a lack of effective management information, please contact one of the BRI team for help.