When it comes to your business, you’re going to want to ensure that everything you are doing is to keep the business going. Whether that means cutting back on your expenses, or simply managing your loans a little bit better, there’s plenty that you can do. If you have a lot of loans or your cashflow is poor, then you may find yourself struggling to keep up with your payments. If you have found yourself in this situation, then you may find that your creditors are beginning to get impatient and you may have to go down the route of a Company Voluntary Arrangement. Here, we’ve put together a list of ways that you can avoid the CVA process, and protect your business in the long run.
What Is A CVA?
Having the knowledge as an owner of a business about things like a CVA is also important, so you know what to expect. A CVA (company voluntary arrangement) is an agreement between a business owner and the business’ creditors that any debts are paid back over a specific period of time. This simply helps to put all of the debts into one sum, and this must be agreed by 75% of the creditors (in money terms). This can benefit a struggling business, as it helps prevent creditor pressure and turnaround in the long run. Even strong, viable companies can have problems with debt and face threats from creditors, so it is important that you have a back-up plan put in place to either avoid a CVA in the first place, or have the ability to pay back all of your debts with a CVA.
A CVA can help to improve a business’ cashflow, while also stopping pressure from tax, VAT and PAYE while it is being prepared. In addition, it can terminate employment, leases and supply contracts with no cash cost, making them very effective for businesses. However, it can leave a mark on the owner’s reputation, so it is important to seek experienced and professional CVA advice prior to agreeing to one.
Have An Accountant
If you’re setting up your business, then you’re going to need a savvy accountant who will ensure that you are always keeping on top of your payments, and will let you know very far in advance if you are beginning to struggle to meet the repayments. While your accountant may seem like a significant cost for a start-up company, they can save you a lot of money in the long run and can keep you on top of all of your expenses. It is important to never ignore an accountant’s advice when it comes to your business expenses, as they are usually always right.
Only Take Out What You Can Afford
One of the biggest pitfalls that new businesses come across is taking out more loans from the banks because their business plan projects that they will be highly in profit within a year. Generally this is not the case, and many start-ups are very lucky to break even let alone make profit within the first year. It is important that you start small, with your office, stock and everything in between.