Are the financial warning signs flashing at your leisure business?

Very few sectors had a tougher time during the pandemic than leisure businesses. In particular pubs, whether they were restaurants that served drinks, or wet-led, suffered as a result of lockdowns and ever changing opening requirements. Now a new combination of challenges is increasing the pressure, as staff shortages and rampant inflation pushes up their costs and the cost of living crisis impacts on takings.

However, financial pressures don’t have to spell the end for a business. Depending on the circumstances business directors may be able to restructure the existing debt, start a new venture via a phoenix company or reach payment agreements with key creditors. Even in the worst case scenario where a shutdown is unavoidable forward planning can provide protection and mitigate potential personal exposure.

Whatever options are available, and preferable, the key to securing a successful outcome through financial difficulties is early planning. The earlier advice is taken the more options a business will have available. It is therefore essential directors look for key warning signs and regularly monitor their position and financial health.

So, what are the key warning signs that your business is in financial trouble?

Struggling with paying your creditors

· Are you having to ask suppliers for longer payment terms?

· Are you awash with debt collectors’ letters?

· Have you got outstanding County Court Judgments (CCJs)?

· Have you had bailiffs turning up to collect debts?

· Are any of your creditors threatening to issue Statutory Demands and Winding Up Petitions?

Battling to keep on top of HMRC debts

· Do you have arrears of VAT and PAYE?

· Are you keeping up with Time To Pay deals?

· Are HMRC threatening recovery action?

Can’t pay back Covid or other loans

· Can you make the scheduled repayments on your Bounce Back Loan or CBIL?

· Have you run out of options for re-scheduling these and other debts?

Maxing out your overdraft

· Are you continually up against your overdraft limit?

No money for business development

· Can’t find the money to run events or promotions?

· Can’t afford essential repairs and maintenance? Pubs are high wear and tear environments and require regular TLC.

Staffing and pay issues

· Have you had to stop paying over pension deductions?

· Are you struggling to meet the payroll?

· Can’t afford to increase pay to keep key staff?

· Have you stopped taking a salary?

Typically, there will be a combination of several of these issues, but each leisure business is unique in how it experiences financial stress. What is common to all of them is that the sooner action is taken to deal with the problems, the better the outcome. If your business is suffering from even a limited number of these issues it is important to seek advice and consult an insolvency practitioner (‘IP’).

Speaking to an IP does not mean you have formally engaged them

It is important to know that discussions with an IP do not automatically lead to them being formally engaged and do not automatically mean it is ‘game over’ for your business. The preferred option is always to bring about a restructuring solution and save a business. There will be no charge for initial discussions and consulting an IP provides directors with the opportunity to concentrate their energies on an identified outcome rather than worrying about what might happen if they ignore the problem

Removing the stress of uncertainty

Asking for outside help is more common than many businesses owners think. We are confidential and bring fresh eyes and ideas to the table. Many entrepreneurs are too close to their businesses to be objective about difficult decisions, especially in troubled times when they are overwhelmed with firefighting. Independent help can be invaluable in finding and then steering a course through stormy seas to calmer financial waters. It removes the stress of uncertainty and allows people to move forward with the assistance of advice from a qualified professional.

This guest advisory article was written by Insolvency Practitioner, Ian McCulloch, Partner at Opus Restructuring & Insolvency who leads the Preston office.