Building your business’ financial resilience for long-term viability and success

Milly Camley, chief executive of The Institute for Turnaround, discusses how businesses can best position themselves to navigate future economic trends.

After successive years of economic shocks including the Covid-19 pandemic, supply chain issues, the energy crisis and subsequent rocketing inflation and interest rates, economic indicators as we reach the end of 2024’s first quarter seem more positive. Inflation has been falling, predictions are for the UK economy to grow (albeit moderately) in 2024, with initial growth seen in Q1, and business and consumer optimism are showing improvement.

Nevertheless, there is still uncertainty about the timing and extent of interest rate cuts and many businesses are still struggling with levels of debt built up over recent years which can limit their ability to effectively plan for growth, as well as navigate future changes, such as increased geopolitical instability and subsequent economic impacts. A somewhat more benign outlook also provides the opportunity for business leaders and owners to consolidate their position as regards debt, financial planning and securing their position to invest for growth. Data from The IFT’s most recent survey of some of our partners working with businesses indicated that key business concerns in Q1 2024 remained costs of servicing debt, inflationary pressures and depletion of working capital.

Some of the key actions often taken by IFT members supporting businesses to manage costs and debt levels to enable future performance include:

• Cashflow: getting a detailed and regular handle on cashflow – rolling 13 week and medium-term cash flow forecasts, including: costs and outgoings, incomings, noting upcoming financial pressures including debt maturity, business development costs and other one-off payments.
• Horizon scanning and options exploration: considering downside scenarios where there may be future impacts on your business e.g. labour market pressures, supply chain difficulties, and how the risk and financial impact could be mitigated. For instance, by operational changes or adding alternative supplier options.
• Seeking external advice for options to address debt levels and increase working capital: advisers can help to inform about options to reduce debt levels and manage creditors, ranging from informal negotiations to tools such as the new company side procedure – Part 26A Restructuring Plans – which allows good businesses to restructure their debt and renegotiate onerous liabilities. Experts can also help a business to explore flexible opportunities for financing to increase headroom and fund investment or transformation. Early intervention using external turnaround support allows businesses to avoid costly processes further down the line and an accredited turnaround professional will more than cover their costs within a fairly short timeframe.

Jonathan Lees, managing director in Teneo’s Financial Advisory team, said, “Businesses have become used to navigating a new normal of costs and funding pressures, as well as broader economic and political instability, but now is the time to really assess your financial position and options for transformation, including by using new data tools, optimising your balance sheet and reviewing supply chains,”

James Davison, a restructuring partner at DLA Piper who specialises in business turnaround and rescue, commented, “The evolving economic environment creates new and different challenges. We see clients of all sizes, sectors and geographies demonstrating resilience, managing change and delivering transformation in a way that works for their business and their stakeholders. Where self-help isn’t enough, there are increasingly powerful and sophisticated tools available to management teams and their investors which can help to accelerate change, re-shape the balance sheet and create a solid platform for growth.”

Kelly Jones, an experienced IFT independent member and experienced turnaround director, said, “Independent advice and support can work flexibly with businesses as and when needed, to provide additional bandwidth for management teams to address more complex issues and put in place longer term changes for future growth.”

An expert panel including Jonathan, James, independent IFT member Kelly Jones and Bride Robinson of Lloyds will be discussing in detail the options for businesses at an IFT and TheBusinessDesk.com breakfast seminar on 26 June in Leeds.