British retailers are feeling the heat leaving many exposed to the vagaries of the current loss of footfall in the High Street, due in the main to the up and up of internet shopping.
The High Street has been relatively benign for many years which has inevitably masked inefficiencies hence failure.
“Businesses fail because they simply run out of cash. Given the consummate ease with which consumers can stop or reduce spending, it is not surprising that cracks can appear quite quickly,” said Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency.
Mr. Irwin argues that there are some simple rules to follow in order to keep a retail business on track. For example, producing regular cash flow forecasts is vital as is setting realistic banking covenants which should reflect the true risk of the business. Indeed, any business breaching banking covenants will rapidly lose the confidence of their bankers.
“In our experience retailers tend to hold on to old stock without realising that it ties up working capital. ‘Discount and flog it’ is the key here. It is imperative to regularly check out the competition and adjust the business model should it become appropriate. Finally, stay alert. If there is a problem act on it immediately and work out a possible solution that can be presented to creditors. Businesses rarely trade out of problems as more remedial action is generally needed. If in doubt seek help as banks do not take kindly to shocks,” concluded Mr. Irwin.