Dealing with company cashflow problems

A row of several white semi-trucks parked closely together in a paved lot under an overcast sky.

The limited company was established more than 20 years ago as Frozen and Ambient Food Distributors. From its purpose-built premises in Cheshire, it employed 17 members of staff. Its diverse customer-base included companies from various sectors across the UK including education, healthcare, business & industry, leisure and major televised outdoor events.

The business grew steadily and managed to successfully secure a large contract with a national contract caterer. This single contract generated about 65% of its overall turnover. Due to the scale, complexity and value of the contract, most of the company’s management attention was focused on this customer. (A common scenario for many small businesses). The client provided good profit margins and, over the next few years, the company traded at its most successful level.

This customer, however, then made a number of changes to its own management structure which led to the company having to compete against other suppliers to secure any future business. The company found itself unable to compete with the larger players in the market who were able to fulfil the contract at dramatically reduced rates. Sadly, the contract was lost.

Further funds pumped in

This had a severe impact on the cashflow of the company. The director soon found that he had to introduce personal savings into the business in order to keep it afloat. (Again, a common scenario for many business owners.)

The company did everything it could to attract new customers and reduce overheads. However, as turnover declined and overheads were not reduced sufficiently, the director was forced to inject further funds into the business through re-mortgaging his matrimonial home.

Over the next twelve months, despite the director re-mortgaging his matrimonial home again and injecting the majority into the business, things hadn’t improved.

Whilst the company did secure a promising-looking contract, it did not turn out as expected. To add to the ongoing difficulties, the company was now finding it difficult to obtain credit due to its poor credit rating and immediate funds were again needed to keep the business going. The proverbial “straw that broke the camel’s back” came when the director discovered that an employee had been using a company fuel-card for his own personal use.

Enough is enough

The director had already invested his life savings and re-mortgaged the matrimonial home as much as he could. There were no more funds to put into the business.

It was at this stage that professional advice was required – before the business got itself into even deeper difficulties. So, the director approached Clarke Bell for professional insolvency advice.

After a thorough review of the business by Clarke Bell, it was agreed that the company was insolvent and should be wound up with immediate effect, in order to protect the assets for the benefit of creditors. The company was formally placed into Creditors’ Voluntary Liquidation (CVL).

A fresh start

After several years of difficulty, stress and personal expense, the director was finally in a position where he could close this chapter of his life and move on. He is still employed in the food industry, but without the burdens associated with being the director of the company.

The director of the company said:

‘’The pressure of constantly working excessive hours combined with continual stress and worry had left me exhausted and unable to cope any longer with the situation…..I had put so much into the business financially, physically, emotionally and had come ‘to the end of the road’.

I was therefore so grateful for the tremendous help received from John and Toyah and the Clarke Bell team. Their professionalism, efficiency and kind and courteous attention was invaluable. They kept me properly informed throughout the whole process with full explanations to my many questions…their patience and empathy meant so much to me.

My heartfelt thanks to them all! ‘’

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