From Toys ‘R’ Us to boarded-up Burslem businesses – it’s how you deal with it that counts

September 22nd, 2017
22 September

Just about any organisation can get into financial difficulties and end up in administration or being declared insolvent. It is not the easiest of times when a business cannot pay its debts but handled properly – and speedily – it need not be a disaster either.

The speed with which events can overtake a company can catch out even the most switched-on accountants.

In August 2017 Data-Centred, a data-centre and cloud storage business in Manchester’s burgeoning MediaCity complex, went into administration. This was less than a year after receiving £1million of funding from external sources including Barclays and private investors. It is hoped to find a buyer for the business and retain all 15 staff.

However, the point is that this is a savvy company working with pioneering technologies; and you can be sure that both the bank and the private investors would have looked hard at the business plan before investing their cash. Yet less than a year later it got into difficulties.

Coming closer to home, a report by Laura James and Claire Miller in the Sentinel on September 18th revealed that Burslem is the worst performing town in the UK when it comes to vacant shops with nearly one in three sitting empty. That is a shop vacancy rate of 31.5 per cent in the first half of 2017 (the national average is 12.2 per cent).

The report added that traders were calling for more to be done to encourage independent stores and big name chains to open.

Unfortunately, not even ‘big name chains’ (remember Woolworths?) are immune from market forces and the effect of management decisions (or indecisions). On the same day that the Sentinel ran the Burslem shops report, Toys ‘R’ Us filed for bankruptcy in the States. The demise of this iconic international toy brand really makes the point for me.

Any business can get into difficulty. You can be based locally with a fiercely loyal local customer base; or be a regional digital whizz-kid of a company with people falling over themselves to lend you money; or an international brand with good businesses in the Americas, Europe, Australia and Asia.

If investors and management teams can’t always see it coming, even experienced accountancy firms can be taken by surprise.

It is what happens afterwards that really counts. As we always say to our accountancy colleagues, insolvency does not mean the end of the world – no matter how difficult things are, or what kind of business is involved, there is always a solution.

And we have been finding them for more than 30 years.