Trading Out

Cash flow problems can affect companies of all sizes, but for a large proportion of these businesses, it comes and goes in phases. A downturn in business profitability is often just a temporary issue, and in such circumstances, trading out is the best way forward. If you’re struggling with the decision of whether trading out is the right option for your business, you’ll need to make a thorough assessment before you decide.

Is Trading Out Right For Your Business?
Many business owners will make the wrong decision because their judgement of where the problems reside and how big the problems are is often clouded. Tough decisions as to whether it’s viable to continue with the company will need to be made. You’ll need to reconsider whether your business plan is still suited to the current market; does your product still have a market for customers? Have you made cutbacks in all the possible areas? Is the shortage of money the only problem?

Trading Out Plan

A trading out plan can drastically improve the health of your business. Identifying weaknesses and how they can be tackled will be key if your business is to be saved.

Contacting Creditors
If you do believe that the shortage of finances is just temporary and that the problems can be rectified, you should get in touch with your creditors to explain your situation. By offering your creditors a detailed explanation of how you intend to get the business back on track and look to negotiate a restructuring of your debt repayments.In addition to looking at your creditors, getting unpaid invoices paid by your debtors should be considered, too.

Important Steps When Trading Out
When trading out, ensure that you:

Scale. Calculate exactly how big the scale of the problem is.
Budget. Create a good estimate of the budget required to turn the business around.
Don’t panic. Ensure that matters don’t get worse and seek the necessary help if you feel you need it.
Correspondence. As tempting as it may be to ignore letters from creditors or correspondence from court, you will have to deal with it sooner or later. The longer you ignore it, the bigger the problem will become so it’s important to not bury your head in the sand when difficulties arise.
Creditors. You should look to develop a good relationship with your creditors. Your creditors need to trust that they will see a return on their loan, so keep in contact with and don’t ignore them.
Court. If you’re summoned to court, you should meet the appointment as it may be your only chance of explaining your difficulties.