Director fatigue still high on the agenda for business owners
Joph Young, Insolvency Practitioner at Leonard Curtis Worcester, says 12 months on ‘director fatigue‘ is still a challenge for businesses
As we know, business owners have faced a confluence of issues since 2016. Brexit, Covid, and the war in Ukraine, have led to surging inflation, increasing interest rates, crippling energy prices, higher debt burdens, and significant labour shortages. And that is far from an exhaustive list!
And whilst they may not have been directly impacted by each ‘crisis’, any combination of the above would be challenging to deal with and is causing further and continued director fatigue.
We have noticed a significant increase in the number of winding-up petitions being issued, principally by HMRC (up from 8 in 2021 to 693 in 2022, with 157 filed in November 2022 alone) but also by other creditors, creating additional pressure on companies and their directors.
One consistent theme I encounter when advising companies in distress, is a lack of robust or adequate management information (MI). This may of course be confirmation bias.
Those companies with robust MI are better placed to navigate the path ahead and less likely to require advice, but it is a noticeable trend.
As I have said before, a short-term cashflow document can be an invaluable tool to business owners of any size and care should be taken to make this fit for purpose, with a realistic approach taken with forecasted sales / income. Often, there is no need to over-engineer this process.
In my experience, as cashflow pressures increase, options typically decrease and seeking early advice remains key to maximising the options available.
Company health check
The government has responded to calls from the insolvency profession to provide greater guidance to directors on what steps to take if they are concerned their business may be facing insolvency.
The Insolvency Service has a useful guide, entitled Company health check: keeping your business on track, to help directors make sure they are acting in the best interests of their business and its stakeholders should their company face insolvency.
The guide offers some practical help on areas such as:
- Your duties as a company director
- Test for insolvency
- Cash flow test
- Balance sheet test
- Your new responsibilities
- Trading while insolvent and personal liability
- When we will investigate your company
- Being disqualified as a director
- Effects of being disqualified
- Fact sheet: Director’s loans
We know that each case differs and so would always recommend that business owners take advice from a licensed insolvency practitioner as early as possible in order to maximise the available options and remain in control.
So don’t leave it, talk to a trusted professional, decide on your actions, and take a positive step towards recovery in 2023, whatever that might be.
Appear in your own In Profile feature by signing up for a Business Profile on TheBusinessDesk.com.
The company and individual profiles on TheBusinessDesk.com are designed to help our clients build corporate and individual awareness within the regional business community and benefit from TheBusinessDesk’s traffic and visibility in the business community and the search engines.