Fending Off Insolvency – How To Navigate The Potential Rough Waters Ahead

Declaring insolvency for a business is every owner’s nightmare, and with the current economic climate both unpredictable and worrying it’s fair to say that most businesses are anxious as to what lies ahead.

The most recent KPMG UK economic outlook report signals a crushing red alert for the future of businesses once the pandemic finally comes to an end. It states, ‘There is also a significant likelihood that the end of the pandemic will be associated with a wave of company insolvencies. Since the onset of the pandemic, businesses have been partially shielded from insolvency both by the direct financial support on offer as well as by temporary measures suspending and relaxing insolvency procedures. Since the start of 2020, the number of insolvencies has been more than 25% below the average pre-pandemic levels, suggesting that these measures have suppressed some of the usual business churn and firm turnover on top of mitigating pandemic related pressures. Once the temporary regime is over and businesses are forced to confront a new normal, we expect a significant uptick in the number of company insolvencies, potentially exceeding the highs seen in 2008-12.’

Business insolvency rubberstamps the overall failure of a business and protecting against it is an utmost priority for anyone wanting to start or front their own company. Safeguarding and using the information from your business to great effect are the fundamental cornerstones of any business leadership. We spoke with Nordens’ Director of Strategic Consultancy, Joe Sword, about the predictions for businesses and the wider economy ahead, lessons learnt from a challenging last year and how to fend off the threat of insolvency from rearing its ugly head.

 

Do you agree with the recent KPMG forecasts that there will be an influx of business insolvencies at the end of the COVID pandemic? What will this mean for wider economy in general?

Yes, I do agree with the recent KPMG forecast predicting a huge rise of insolvencies as the pandemic draws to a close. This is predominantly down to the furlough scheme in my opinion and the fact it’s been extended for such a lengthy period of time, allowing businesses to avoid making crunch decisions. Once furlough ends, these crunch decisions will have to be made and button needs to be pressed as the recovery process yields its axe.

On the other hand, because the pandemic and subsequent furlough schemes have gone on for so long, it’s possibly enabled businesses to pivot and adapt to a new structure which could be even more positive than their original offering. I think there will be definitely an influx of business insolvencies, as history tells us this is only natural during an economic recession recovery, however the timing of the extension could have provided the impetus for businesses to survive and keep afloat.

The focus on long term growth and opportunities has been because businesses have adapted during the unpredictable climate. For the economy, many businesses were operating at unsustainable models just to be competitive in a saturated market, so I think it may cleanse the environment of many sectors and allow for a structural reset. The stronger companies will become stronger and the ones who were not sustainable will be slowly be phased out. It may take a while to kick in, but there are many positives economically which could happen.

 

What are some of the basic ways a business can fend off insolvency during the current economic climate?

It comes back to your business model and offering in general. You need to know where you are and be very clear on cashflow. Constantly looking for ways to pivot the cliff edge can be stressful, however thousands of business owners are in the same position and at the end of the day it comes down to survival of the fittest. Essentially you have to analyse two things: outgoing costs/debt and incomings/profit.

You then need to figure out what are your projections are, what are you doing to generate new leads and install confidence in your staff. If you’re in a business which offers a ‘luxury’ product offering, it may be worth restructuring and looking to offer something more reasonable. It’s essential we use the planning and experience of the past year to allow our business to be as healthy as possible. This can be done through five key areas:

  1. Put in place robust forecasts, looking at different types of scenarios so you have a plan A, B and C. This will give you control and confidence, allowing you to accurately compare these to your actual performance on a regular basis to see, spotting trends and triggers to improve on.
  2. Stress test your business model on a regular basis, ensuring it remains viable in the ever-changing world we now live in.
  3. Speak to your customers regularly. Due to COVID, their appetites may have changed and what they once valued may not be as important now, and vice versa.
  4. Look to innovate. We are seeing many businesses focus on this now, whether that is creating new products or services, tweaking existing products and offerings to make them more in line with a post-COVID economy, or making the most of technology to digitally automate and streamline time consuming tasks. For many, COVID has helped ignite the entrepreneurial spark in many people and I think we will see the fruits of this for many years to come.
  5. Spend time with your people. We have so many people to thank for their support throughout this pandemic, most notably the NHS and key workers, and closer to home your people have been on the proverbial battlefield with you throughout. It is important to truly gauge how they have been affected, so you can support them and help reenergise them for the next chapter.

It’s also worth noting, don’t bury your head in the sand. HMRC are currently very lenient and understanding as a vast number of businesses are struggling to pay their bills and debts. Being honest and upfront will give you peace of mind whilst covering your back against any late penalties and fines on the horizon.

It can be tough but critiquing your team and asking what their values are can be crucial. The value they bring to the table may have seriously diminished in a post-COVID world. Being straight about this is necessary in order for your company to prosper long term and come out of the other side of the pandemic in a stable position. Likewise, make the most of furlough in the last few months as it’s there for a reason and could just give you that last bit of a helping hand which can make the difference.

 

Is there a case that with the digital evolution in business, spurred on by the pandemic, that some companies will inevitably become redundant and essentially not be needed any more (retail, arts/gig economy, hospitality, construction)? What do you advise for these types of industries?

I firmly believe companies that are not willing to adapt will become redundant, whether that be in the short term or the long term. The industries will always be there in some form or another, however analysing the way your products/services deliver value to the end customer is key.

Let’s take toy shops for example, and the way the quintessential toy shop has completely transformed to what it was when we were children. Toys “R” Us reigned supreme for what seemed like an eternity yet as the retail market slowly started to adapt to an online offering, Toys “R” Us couldn’t keep up and were eventually overtaken by online vendors such as Amazon as well as supermarkets wherein customers could consolidate their purchases (food, groceries, gifts etc.) all in one place. It’s imperative that businesses continue to adapt, as things will continue to evolve and tweaking your model is always going to be needed.

The digital revolution, so to speak, is for me a positive vision and should be prioritised as a growth purpose. Businesses need to embrace this as a priority, otherwise failure is a very likely possibility.

 

What are some of the biggest lessons learnt from the pandemic and how can businesses put themselves in the best possible future position (post-pandemic) based on their circumstances/sector?

One of the biggest lessons learnt I feel is collaboration. Look at how many businesses out there who are collaborating and working together, which if executed and delivered well could see a whole other direction of revenue rubberstamped. I think businesses need to be joining forces and maximising their exposure and potential. As well as this, try your very best to not put yourself in a position of reliance on one given part, whether that be a particular market, team member or a product/service. You need to broaden your repertoire whilst still keeping to the same principals which have brought in success. One of our clients has a really strong hedging model, where their product offering is weather-dependant. One supplements the other at certain points of the year and I believe this diversified offering is a huge winner for them. Hedging your income and profits based on a time, audience or theme can spread the reliability, leaving you in control to utilise their strengths. When something isn’t going so well, you have the tools to switch it up and offer something different that could bring about a huge gain.

The pandemic has given many businesses the kick needed to study their numbers and analyse their figures. Working on cashflows with businesses over the past year has enabled owners and senior management to obtain knowledge which can be used to push and critically evaluate their team and outgoings. Forever asking yourself the question, ‘where is the value coming from?’ will help you understand the value-focussed economy we currently inhabit. It’s given everyone a shake and when times are tough, it separates the wheat from the chaff. People will still purchase if value is matched to their preference, and always keeping that in mind will be influential in the not-too-distant future.

 

We hope this has outlined to you how to reduce the risk of business insolvency. If you require any more information on the strategic advisory programs we provide, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.

We’re now also offering COMPLIMENTARY Strategic Consultation Sessions up to 30th June 2021. Please contact Nordens’ Director of Strategic Consultancy Joe Sword at js@nordens-strategic.co.uk or 020 8530 0720.

 
Beyond Accountancy

At Nordens, we're more than just accountants - we're business experts who can help you achieve your biggest goals.

Nordens Strategic

Our specialist strategic division at Nordens boasts some of the leading entrepreneurial business minds in the country. We cater towards delivering consistent success stories, whilst helping businesses achieve above and beyond their initial goals.

Through highly-tailored guidance, coaching and advice, Nordens Strategic are able to define exactly how your business can reach new levels of success.

Regardless of how you define ‘success’ for your business, our strategic service is guaranteed to bring about real and lasting change. By partnering with some of the UK’s top business coaches, we’ll steer you along the path to a greater future.

Accounting 2 You

Every business, no matter how big or small, needs to make the right decisions, and how to best manage your accounts can put huge question marks over your business. Accounting2You is here to take that pressure off and provide you with all the answers you need.

Our bookkeeping branch offers a fully inclusive, comprehensive service that you can trust. Since 2005, our specialist bookkeepers have been successfully managing the accounting of both individuals and small businesses.

With experts in payroll analysis, credit control and financial recording, Accounting2You will lead your business efficiently, and with real purpose, towards a prosperous future.

Voted as EXCELLENT - 9.9 out of 10 based on 167 reviews

<
Chris Dyer

Director - Metro Bank

Nordens are always very easy to deal with and extremely professional and efficient. I would have no hesitation in recommending them to my clients for their accountancy needs, no matter how complex they may be.

Read more reviews on Trust Pilot

Jamie Brown

Co-Founder - Chicmi Limited

Very good to work with - the team go above and beyond to make the accounts easy and efficient. They're all super friendly and a joy to work with.

Read more reviews on Trust Pilot

Simon Rose

Director - Rose Opticians

I have been using Nordens Chartered Accountants for 5 years and very happy with the service provided. All members of the team are very knowledgeable and have a wealth of experience which has proved very beneficial to my organisation

Read more reviews on Trust Pilot

Rebecca Bossick

Founder & Director - Physio LDN

Very easy to contact and put me in touch with the right person whenever I need to ask any questions. Extremely knowledgeable and can help me manage my various businesses whenever I need.

Read more reviews on Trust Pilot

James Aconley

Principal - Pauline Quirke Academy

Great accountants, always available to offer advice. The team have transformed my business.

Read more reviews on Trust Pilot

Christopher Wilce

Founder - Dataphone

Having worked with Nordens over the last 5 years, not only to look after my annual accounts but they have also provided outstanding professional advice. They have guided me through a Company share buyback with clear and objective advice. We have also been using Nordens strategic services for a couple of years, which has helped bring about significant improvements that exceeded my expectations. With experience of working with several local accountants over my 29 years in business, I’m very pleased with the service I have received from Nordens.

Read more reviews on Trust Pilot

Dave Hodges

Director - Linekers

Trusted our business with Nordens for over 10 years now and watched the company grow into the successful innovative business it has become today. Deservedly so. Every aspect of financial advice we need is always given promptly and with a smile. We have total confidence in all aspects of advice Nordens give. If you are looking for accountants, its a no brainer!

Read more reviews on Trust Pilot

Tony Charles

Founder - Foundation Sports Limited

A fantastic, modern, vibrant firm that care about the clients and their staff in abundance. It is rare to find an Accountancy firm with such vibrance and focus and relationships. It is no wonder they win award after award in their field.

Read more reviews on Trust Pilot

Peter Horlock

Managing Director - Prime Time Boilers

I have been with Nordens for many years now and they are a great accountants.

Read more reviews on Trust Pilot

Simon Cushing

Founder - Vivid Finishes

We have used Nordens for the last 5 years and have had a great service throughout. The guys are very passionate about what they do and have played a part in the growth of our company, highly recommended.

Read more reviews on Trust Pilot

Andrew Martin

Managing Director - AMD Interior Architecture

Great Service at Nordens from a friendly very approachable team Particularly Kirsty Willis and Joe Sword who have been helping us since we started the business in 2016.

Read more reviews on Trust Pilot

James Robinson

Director - Forma London

Nordens provide a first class service. We moved to Nordens last year and have been impressed with the level of service provided. Keep up the good work!

Read more reviews on Trust Pilot

>
Latest News

We've always got our ears to the ground when it comes to interesting, useful and topical information relating to business and accountancy.

The Autumn 2021 Budget…
The Chancellor of the Exchequer, Rishi Sunak, will be carrying out his red briefcase and laying out his Autumn Budget plans on Wednesday 27th October 2021. The Autumn Budget doesn’t usually attract massive attention, however du...
5 Reasons Why Your…
Much has been made regarding the rise of digitalisation in most sectors in the UK, however one thing which isn’t covered extensively is the benefits of hiring a Virtual Assistant (VA). VAs are essentially a service which provid...
Nordens TV

We love making videos that break down convoluted accountancy jargon into plain-talking, actionable and accessible facts.

Live Webinar – Time…
Watch our latest LIVE webinar titled ‘Time To Revive' that was held on Wednesday 3rd February 2021 at 4pm GMT hosted by our CEO Mitch Hahn. Last year was tough for all of us. Now is the time to see what 2021 brings and how we c...
Our Christmas Message To…
Merry Christmas to all!   Here we have Mitch Hahn, CEO of Nordens Chartered Accountants delivering our Christmas message to you. Click the video link or read the full transcript below.   As we enter the ho...
  Why I Founded Nordens
Accounting 2 You

In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier. The difficult part, for me, was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.

Mark Norden Signature

Mark Norden
Founder

We're Professionally Certified

Our limited company accountants have a range of qualifications from The Institute Of Chartered Accountants (ICAEW) to the Association of Chartered Certified Accountants (ACCA). We worry about the bye-laws, regulations and ethical guidelines of the ACCA so you don’t have to! That makes us an ACCA-accredited employer as well as a Professional Passport-accredited one!