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Administration – Good Or Bad?

Recently there has been both bad news and good news about companies going into administration. Humberts, described as one of the country’s oldest estate agents, based in Wilmslow, has gone into administration for the second time in the last 18 months. When the company first went into administration it was bought out by another company and staff were told that a number of jobs would be saved. On this occasion staff have been told that branches are to be closed immediately and they are being made redundant.

On a more optimistic note, there was news of 1400 jobs being saved after a 100 year old bakery business was bought out of administration. The bakery concerned was Sayers The bakers also trading under the style Poundbakery. This is a local business with a bakery and distribution centre in Bolton and the majority of the shops located in Northern England. It has indicated that the majority of those shops will continue to trade but a small number will close.

These two contrasting items of news show that, sadly, even businesses which have weathered the storm for over a 100 years, are far from immune to trading difficulties which then force them into administration.

The purpose of administration is to see if a business or some part of it can be saved and continue to trade. This was clearly the hope for Humberts when it was bought out of administration first time round. It is to be hoped that the purchasers of Sayers will fair better than the purchasers of Humberts.

It would be simplistic to suggest that the fate of a business is in its own hands. There are however a number of steps which an owner of a business should take to protect themselves and the business, which, unfortunately, are sometimes viewed as an unnecessary expense. It is common to see owners of family businesses put their own money into a failing business without considering whether that is sensible and whether there is any way that money can be repaid if the business rides the storm and continues to trade.

The knock-on effect of bad debt is another common feature of businesses who get into financial difficulties The old maxim about “know your debtors” is as true today as it has always been. You should always make sure that you know who you are dealing with, regularly check their credit rating and be wary of people who suddenly want to extend their credit accounts. It may be that they have a lot of extra work or that other companies have turned them away for fear of being left with bad debt.

If, as an owner of a business, you are concerned about the wellbeing of your business, you should always seek advice from trusted professionals who know you and your business.

If you wish to discuss any of these matters in more detail then please contact Fiona Gaskell at Clough & Willis by emailing her at Fiona.gaskell@clough-willis.co.uk