FOR A LONG TIME, large retail chains have dominated the market, and many smaller retailers can’t understand how they are able to do so. They look at the margins they are making, and wonder how larger stores are able to sell at the prices they do.

Is it just because of their size? Is it because of their large product offering? Do their enormous advertising budgets swing sales their way?

While all of these factors help large retail chains to dominate the market, the real reason the big retailers continue to grow while small players are swept aside is their ability to extract more money from their suppliers in the form of trading term arrangements.

I am regularly asked by smaller retailers if they should negotiate with their suppliers to get some of the great deals the big guys get? My answer is always the same. What is the worst that could happen? You might get turned down, but you won’t lose anything by trying.

Suppliers aren’t going to rip their stock out of your store simply because you asked for a trading terms arrangement.

Putting trading terms together This shouldn’t be a difficult task. Just start by listing the areas of concern for your business, and areas you want to accelerate. Here are some questions you can ask to get yourself going:

- How can I extend my payment terms?

- How can I spend more money on advertising?

- How can I sell slow moving lines?

- How do I get more dollars per square metre?

- What is my value to the supplier?

- How can I ensure that I am always in stock without holding high volumes of inventory?

- How can I rapidly open additional stores?

- Can I get the supplier to pay for the fixtures in my store(s)?

Now that you have asked yourself these questions, start to think about ways in which you can get a better deal from your suppliers. What is essential is that you show your suppliers how they will benefit from the arrangement. It must be a win/win situation for both parties.

If you’re wondering what areas the big retailers target, I have listed some of the bonuses they negotiate in their trading terms. There are more, but these are the outcomes I feel are of greatest benefit to smaller retailers, and the ones most likely to succeed.

Rebate contributions – Your suppliers need to ensure that you can further develop and promote the industry to ensure that their business survives and grows. The most practical way to calculate a rebate contribution is a fixed percentage based on net invoice values.

Settlement discounts – If you are prepared to pay for invoices promptly, you could negotiate a settlement discount if you pay within an agreed date.

Sale or return – Allow the rotation of product without the requirement of a replacement order. You could also negotiate a sale or exchange of product, and sale or markdown of product.

New store openings – Ask for one-off opening order discounts for all new stores. This will help your cash flow greatly in your store’s early days.

Sales person incentive policy (SPIVS) – Approach a supplier about offering an incentive to sales staff to sell problem or promotional stock. Additional commission or gifts are the way to go.

Show your value

You must show suppliers the uniqueness of your brand. If the supplier sees value in what you have to offer, they will give you more than you expect. Also work on selling your vision. If you have growth strategies or exciting marketing campaigns in the pipeline, get the supplier to buy into the vision and become a partner in the success of your retail business.

Dealing with large chains is a necessary evil for suppliers. They have manufacturing plants that require volume trade to pay for employees, machinery, and R&D. They see smaller retailers as an opportunity to get some margin back! This is where the opportunity lies! Get them to partner in your growth strategies.

The amount of money that you would be asking for in your trading terms would be miniscule compared to what they get hit for by larger chains. If you handle negotiations in a professional manner, and always negotiate win/win outcomes, your trading terms will increase your profits and help your business grow.

Tony Gattari is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next guest speaker, sales speaker, marketing speaker or keynote speaker. Achievers group provide marketing and sales training, consulting, marketing workshops and keynote speaking services. See http://www.achieversgroup.com.au for more.

THERE IS A DILEMMA that is affecting retailing worldwide. It’s hurting the likes of Wal Mart, Retravision and Coles (and even Myer). It is a disease that sucks in the small retailers, which explains why a lot of them get belted week in, week out.

The disease has a name: commodification.

As soon as your products are also sold in multiple retail outlets, when customers can understand that there is no mystery in why that product is important to them, or purchasing is based on the lowest price available, they become a commodity.

Then the retailer stacks their stores with all of these commodity items, promotes them because everyone else does, and touches up the price because the big guy down the street is slashing the prices; these are signs of commodification. Once a retailer suffers from commodification, they go through the process of denial, blame, and go in search of experts who try to explain the reasons why their business is going south.

Experts will diagnose the problem as a lack of branding presence in the market place, enhancing the customers shopping experience, poor supply chain, high wages or poor store layouts. Yeah, this may be part of the problem.

Economists will talk about basic supply and demand. That high demand for a product will naturally bring down the price of an item, because it is now cheaper to produce. They will also add that pure competition forces retailers to drop their price because the market will force them into that position.

Experts and theory don’t explain this – retailers have an addiction, an addiction to sales. The drug is volume, and once one retailer uses price to increase market share, and is successful in the process, they will link the spectacular growth in the business to discounting. If only there was a ‘discounters anonymous’.

Retailers are always complaining about poor margins, but it is the exact same retailers who are forcing downward pressures on price well before the market demands it.

A cure to kick the habit

Once you find out your business suffers from commodification, it is like being told you have two months to live. Some survive, some live longer but eventually die, and others have a quick death. The strategies listed below are the preventative measures and cures for commodification:

Prime mover advantage – Is there something that you have that is so new, so unique, so desirable, and so exciting, that you can create a real buzz or hype in the market? If you don’t have such a product, have a look at what is happening outside of your initial market, what opportunities are there that you can take to market (though using the great perception tool of marketing) before anyone else does?

Treat the new product category as a separate business – One of the great ways to take the new product category to a leadership position is to treat the category as a separate business. Allocate separate budgets, resources, marketing efforts etc. Remember that new innovations initially can make up to a fifth of your sales, so don’t forget your core business.

Lengthen the product life cycle – Once you get prime mover advantage, and own a market category, you will inevitably get copycats. What a lot of retailers do is to use the market position and great purchasing power to take market share by reducing price. You should promote your leadership position; have aggressive marketing programs to protect your market share, by placing you as the expert of that product.

Add Intangibles – Intangible offerings that can be bundled into the product that are unique and reduce any fears that a customer may have of your product are a great way to maintain market share without discounting. Some great examples of intangibles are interest free finance, extended warranty, and payment plans, which are great innovations that have secured the market position of retailers who have embraced this concept.

The solution is simple. Limit your exposure to items that are commodities in the market place, by finding products/services that are so unique and exciting, that you are the first to take them to the market, and once you have a leadership position use that as a marketing tool to maintain that position, and avoid discounting as a defensive/offensive strategy.

The golden rule for retailers – don’t get high on volume. That thrill turns into an addiction.

Tony Gattari is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next guest speaker, sales speaker, marketing speaker or keynote speaker. Achievers group provide marketing and sales training, consulting, marketing workshops and keynote speaking services. See http://www.achieversgroup.com.au for more.

An experienced retailer, Tony Gattari, looks at the trends shaping retailing in the next decade.

A PHENOMENON is sweeping the retail world that is threatening to overwhelm smaller retailers, and if your business doesn’t respond, it will be extinct within ten years.

But don’t fear – Killer Category Retailing shouldn’t only be the domain of large chains. Anyone can build a killer category retail business! Once you apply the principles to your business, you too can take a category and ‘own’ it. The key is to define your ‘unique selling proposition’ (USP) through selecting a dominant product assortment and then creating a delivery mechanism.

Selecting Your Product Assortment

Retailers continually mess this up. This is why you regularly see mass discounting as stores desperately reduce inventory levels and confuse their selling message. Start off by asking yourself this question – “what does my brand mean to the market?” This can be rectified by distinguishing between:

- What the customer buys – These are the core drivers of your product assortment – where the bulk of your purchasing, time, and energy are focused. This is your dominant assortment of merchandise.

- What the customer wants – These should be the innovative products you sell. This is where the growth of your business comes from once your core business has settled and growth begins to plateau.

If you have a retail business that sells ‘designer handbags’, but along with your product offering you also sell accessories, and dabble with ‘designer shoes’, your product assortment would be:

- Core Business – Designer Bags (What the customer buys)

- Innovative Business – Designer Shoes (What the customer wants)

- Complimentary Products – Accessories (Added Value Items)

Notice that the accessories (or added value items) are considered complimentary products. This is so the marketplace doesn’t mistake you for being a ‘bags and accessories store’. Your uniqueness should be in the exclusive range of designer bags and what they mean to the consumer. Accessories are an add-on sale, not the sale.

Time and time again, retailers build their complimentary and innovative product offerings so much that everyone (staff included) is confused about what they originally sold.

Delivery Mechanism

Once you have determined your product range, the delivery is crucial in building your uniqueness. There are four delivery mechanisms:

1. Low Prices – This is where you offer the lowest prices e.g. The Good Guys.
2. Service Focused – Your delivery is based on giving high levels of personal service to the customer.
3. Convenience – With everyone being time conscious this is fast becoming the dominant delivery mechanism. Can your customers find what they want quickly, with minimum hassle?
4. Fashion Driven – Perfectly defined as selling “the latest products just as customers begin to buy them in volume”.

Which delivery mechanism does your business use? The secret to a Killer Category business is to master one of them better than anyone else. The next step is to excel at another delivery mechanism, and be good at the other two, or don’t use them at all.

Using our designer handbag store, we would rank the delivery mechanisms as;

1. Fashion Driven – The latest products for the customer.
2. Service Orientated – High levels of service so that the bag matches the shoes that match the accessories. Now use this model to rank your delivery mechanism? Is there clarity in the message?

Using this example, we have just created a designer handbag store that offers the latest products when people begin to buy them in volume, with a service team that helps the customer to match the bags with complimentary products.

These strategies have been implemented by retailers such as Harvey Norman, Rebel Sport, The Good Guys, Gloria Jeans and Bunnings with amazing success. The principles can help you create your own Killer Category retail business, dominating a market regardless of your size.

Tony Gattari is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next guest speaker, sales speaker, marketing speaker or keynote speaker. Achievers group provide marketing and sales training, consulting, marketing workshops and keynote speaking services. See http://www.achieversgroup.com.au for more.

MY WIFE LIKES going to the ballet. I myself am not that keen. However, one night I took my wife to the ballet to keep her happy, and paid $250 each to attend the event. Now as I was sitting there, I started to think to myself ‘Would I pay $250 if the dancers turned up on the night, had not been given any choreography, and that night was the first time that they practised?’

Imagine the uproar, as the people would have been demanding their money back! Imagine what the critics would have said! The whole production would have been shut down!

Yet everyday, a retail business hires some young employee, does not invest any time in teaching them properly, does not supply them with the appropriate systems that give a consistent level of service, and does not give the new employee a guideline on what the expectations are of the job role. Why are you letting your employees practice on your customers? Lucky that it’s your money that is leaking out of the business, and not mine!

The McDonalds model

How is it that a teenager who cannot clean their room, could be able to run a multi million dollar business? It is because McDonalds have systemised everything to deliver an exceptional level of consistent service time and time again. From the ordering of stock, to the cooking of the food, to the front line service.

McDonalds philosophy is simple – if the franchisee is not making money, it is because they are not following the system. Now ask yourself this question – is my business not making money, because I do not have a system, which produces an exceptional level of service, which drives people into my store, and gets customer to purchase over and over again?

To ensure success in your retail business, you need to set up some real simple systems within your business to ensure that you deliver an exceptional level of service time and time again. Here are the ones that you need to have.

Point-of-Sale System: The issue with most retail businesses is that they purchase a POS system for the lowest possible cost. This issue is rife with small retailers, as they use their POS as a computer with a cash drawer. Without spending a fortune, a retailer can invest in a POS system, which can link with sales objectives. Look at having a popup reminder system that reminds the employee to sell an added value item. Also invest in a system that allows you to collect the customer’s details on purchase, and produces reports on what your loyal customers purchase on a regular basis.

Inventory Management Systems: It is amazing how many retailers don’t have visibility on their stock situation on a daily basis. Now, to maximise the return from your Inventory Management System, it is imperative that you use the system to set re-ordering levels (or basic stock levels), so that you are always in stock of your bread and butter lines. Sales Systems: Do you have scripts for how people answer the phone? Do you have a system for how employees handle customer complaints? How do your staff greet customers as they enter your store, and more importantly, what is your expectation of your staff in the time it takes to greet a customer? If you don’t have these basic systems, stop what you are doing, and write them down now! It costs you nothing to set up and train your people on these basic systems.

Induction Process: Remember the ballet story. No one who is on your shop floor should be serving customers until they are properly trained on how to serve a customer, have been given basic product knowledge training, know how to put a sale through the register, and know what your expectations are of them. Pain generally activates the mind, so imagine if your new employee loses a sale because they are serving a customer who wants to purchase a $3000 plasma television. How long would it take you to make that $3000 back, as well as recover your reputation?

Retail is not difficult, and it is not meant to be. So as you develop your systems make sure that a 16-year-old can understand them and that the system is there to make you money, by ensuring that your people serve your customers consistently so that they not only close the sale, but also give the customer a reason to come back.

Tony Gattari is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next guest speaker, sales speaker, marketing speaker or keynote speaker. Achievers group provide marketing and sales training, consulting, marketing workshops and keynote speaking services. See http://www.achieversgroup.com.au for more.

Whatever type of business you are starting, there are steps you can take to join the ranks of the environmentally-friendly and energy efficient workplaces. Going green is not just a socially-conscious decision – it can also save your business money and attract customers concerned with environmental issues. A good environmental strategy will encompass all areas of your business, from building your space to incorporating the three Rs (Reduce, Reuse, Recycle) into your day-to-day work.

If you are building or renovating commercial space, building green means installing energy efficient HVAC systems, appliances and lighting. Many major construction contractors are altering their business practices to go green as well. Ask your contractors whether they are certified in green building and ask for recommendations on how to use green materials to renovate your space. Making sound environmental choices in building products won’t necessarily cost more, and the effort to find green options in building will benefit everyone in the long-term.

If you have a home office or standard commercial office space, there are simple improvements you can make to the space to both cut energy costs and respect environmental concerns. Replacing your HVAC filters frequently will lower energy costs, as will using compact fluorescent lamps instead of standard light bulbs. Consider swapping standard light switches with occupancy-sensitive switches (they turn off when no one is in the room). Programmable thermostats are relatively inexpensive and will ensure you are not heating or cooling your space unnecessarily. Temperature can also be controlled inside through weather-protective measures like ceiling fans, weather-stripping, and other cheap insulation projects.

Many business supplies and products are also available in environmentally-friendly versions. Look for items made from post-consumer, recycled materials and that can be recycled or renewed again after use. Use bio-based and non-toxic materials whenever possible, and consider purchasing locally produced products.

All appliances and peripherals should be as energy efficient as possible – look for the Energy Start label when available. Consider using entirely or partially renewable energy sources, such as wind or solar power, for your company’s electricity needs. If you choose to install it at your location, the original equipment to harness the energy will cost you a bit, but you will save money in the long run on monthly utility costs. And many utility companies now offer the option of purchasing energy from renewable resources, often for almost no increase in cost.

Include environmentally friendly policies in your business’s SOPs, and encourage a culture of responsibility in this area as well. Make it easy for your employees to follow the three Rs – Reduce, Reuse, Recycle – by encouraging electronic rather than paper storage and document usage, providing recycling bins for the specific materials your local recycler will pick up, and offering incentives to employees who develop specific cost-cutting, Three R-compliant measures for the company to implement. If your company produces hazardous waste materials, you not only pay for the raw materials, but you pay again when you dispose of the waste. Do some research to see if you can exchange any of your processes for ones that do not produce expensive waste.

Establishing green policies will also help your bottom line. Your business will save money on waste removal, raw material costs, and office equipment and supplies. In addition, streamlining processes to reduce paperwork will improve your business’s overall efficiency and productivity, not to mention enhancing goodwill.

Going green is good for business. The data and resources you need for improving your company’s environmentally friendly status are widely available and, for the most part, will save your business money in the long run. And, making sound environmental decisions will enhance your company’s image in the eyes of your customers.

About the Author-K. MacKillop, a serial entrepreneur, is founder of LaunchX and blogs about entrepreneurship. LaunchX is a complete business startup kit including step-by-step startup instructions, software, and tools to turn any idea into a successful business. Over 2,000 hours of research are distilled into an easy to follow roadmap to starting a business.

One of the main reasons for business failure during recession is late or non payment of debts. If your customers pay very late or not at all, this may put your business in an extremely difficult financial position. In turn, you may need to delay payment to your suppliers and so the problem moves on through the economy.

Here are some tips to persuade your customers to part with their cash.

Get your solicitor to write a letter before action (LBA)

A Letter Before Action is really a written warning to your debtor of the action you are prepared to take if your debt is not paid. The letter will normally imply that court proceedings will be issued and costs and interest (see below) added to the debt. Involving a solicitor will incur cost, but the reality is that debtors take a solicitors letter more seriously where they may ignore a threatening letter written simply on your company’s letter head.

Include interest in your claim

The Late Payment of Commercial Debts (interest) Act 1998 is not well known, but gives businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. If you do not already have provisions for adding interest in your standard payment terms, you can add such under this legislation. Your calculation of interest should be included in any letter before action that you send to debtors.

Pursue County Court Proceedings

Depending on the size of the debt this may be cost effective. If you do decide to instruct recovery experts, the advice is always do this sooner rather than later. It is likely that the firm you are pursuing for payment also owes money elsewhere. However, be mindful that if a County Court Judgement is agreed in your favour, the debtor may choose to ignore it and continue to avoid payment.

Threaten a winding up order

The threat of a winding up order has become much more prevalent as a debt collection tool in the past 12-18 months. Any individual or business owed more than GBP750 can petition for the winding up of a company. This threat has significant teeth.

If the petition is granted by the court, this will be advertised in the London Gazette. The advertisement will be picked up by the businesses bank. As a result the bank is likely to freeze the company bank accounts until the petition is either withdrawn or the winding up procedure ordered by the court. Clearly to have a bank account frozen is a massive inconvenience for any business. With this threat, a debtor is more likely to repay what they owe than if they were to simply face a county court judgement.

In the current economic environment, it is extremely likely that you will face the late or non payment of invoices. If your business is owed money, it is of course preferable to come to an amicable informal agreement for this to be repaid. However, where this is not possible, it is important that you take action to collect debts and as far as possible, protect your own business’s financial position. The best advice is to act swiftly and do not be afraid to use the threat of court action where this is necessary.

Derek Cooper is Managing Director of Cooper Matthews Limited. Find out more about Insolvency Recovery Options that can help you rescue your business. Get expert advice and more information at http://coopermatthews.com/business-recovery-services-advice.html

Geocoding is a useful thing for you to do for finding and recording geographical data. You can use geocoding software to help you with getting locations, found with ease. This software can be easy to use and can work with all sorts of benefits.

Geocoding software works in that data can be found on a map and stored for reference. What happens is that you will first get a map loaded up onto a computer. This map can consist of coordinates of an individual zip or postal code. It will then load up with an address dictionary. This is a dictionary that features information on addresses in that particular geographical area.

With this software the physical and address map data will work together to help with locating things. If you enter in a certain address on the software you can find a location on that map. This works in that your address data will be plugged in according to latitude and longitude. This works with accuracy in mind.

The accuracy of one of these programs is great to see. Each geocoding software option will work with digital maps. These are maps that find properties according to satellite images. Individual properties can be marked according to specific latitude and longitude levels. The accuracy of the map will be improved and you can have an easier time finding things on it.

Some geocoding programs can work with mapping programs as well. These include programs like Microsoft MapPoint. The geocoding software can work with another mapping program as its data source. The ability to reach areas on a map will be easier to handle and the process will be faster.

Additional variables can be entered into this software too. For instance, you can add some variables on addresses individually for your needs. You can add things like income of an address, property value or age of the property. Each individual program will work with its own variable input system though. You should check on this feature when looking into software options.

There are many benefits to see with this software option. You can work with getting software to find data with regards to individual locations. For instance, if you own a business you can use this software to find data on locations of potential clients. This includes finding areas with residential homes that are near your business.

Being able to find demographics of people in an area can be easier to handle. If you have address data with regards to income you can map out incomes of people in an area. By entering and adding variables for income you can get a map of where people of certain incomes live.

Geocoding software is a valuable option for software to check out when it comes to mapping things. You can find things in an area with ease and accuracy. You can even enter in variables for data when finding places. These are great for finding not only area demographics but also with working with business processes.

Location intelligence is particularly helpful for individuals that are new to the foreign ground. As the Canadian address database provides a wide selection of neighbourhood maps, it is very convenient for individuals to use the geocoding software.

In these volatile economic times, businesses are looking for ways to improve efficiency. Every business understands the phrase, ‘time is money.’ In order for a business to be successful, managers know they have to optimize their time. To improve business efficiency, increase productivity, and reduce operating costs, more businesses are now hiring call centers.

There are a number of ways that a call center can increase business efficiency. For instance, call centers have the ability to provide a business with real-time information about the status of its productivity which allows the business to make changes and modifications in order to improve any productivity weaknesses. Real-time reports provide important data in an instant and the detailed performance reports can be viewed within in an hour, or in a day, week…etc.

Cost efficiency is a key benefit of using the services of a call center. Businesses will not have the expenses associated with creating and running their own customer service centre such as maintaining a building for customer representatives, purchasing business equipment, overhead costs, and costs for training and retaining employees.

Call Centers will allow businesses to centralize their customer service relations in one place where the needs of their customers are met with professionalism and quality service. As well, they will provide and set up the necessary technological communication devices such as telephone, email, and fax in one place so that productivity can be carefully monitored for efficiency. Customer inquiries will be answered quickly and efficiently so that customer communication is professional and complaints are resolved in a timely manner. Call centers take the load off businesses while ensuring customer satisfaction is maintained. As well, because customers can call at all hours of the day and night, and often there is a high volume of calls coming in, the call center reduces customer wait time on the phone and there are trained customer representatives available 24 hours a day seven days a week to answer customer calls.

In one central location, a call centre can handle such services as customer inquiries and complaints, technical support, processing orders, checking the status of an order, processing customer payments, replying to email inquiries, managing customer loyalty programs, managing or selling subscription services, provide banking services, and much more. As well, call centers can also manage outbound programs such as appointment scheduling, generating sales leads, selling products or services, payment collections, telemarketing services, market research such as giving surveys, and much more

Call centers allow a business to free up their time to focus on the day to day activities of running their business. They will provide trained and qualified customer service representatives to resolve customer issues in a friendly, courteous, and knowledgeable way. As well, they will use the most up to date technology to meet the needs of the business with back up protection. The result is an efficient and cost effective call centre that saves businesses a lot of money and will also result in increased productivity and reduced waste. A highly efficient call center allows a business to improve their customer relations, cut down on operating costs, boost sales, and thereby increase profitability.

Asterick phone systems provider offers cost effective telecommunication solutions including open source call center in Toronto, IP phone systems and other telephony hardware. When looking for Asterisk consulting, consider these services.

If your business is in financial trouble, you may be better off undertaking a Company Voluntary Arrangement instead of struggling to raise the funds necessary for a Pre-Pack Administration.

Over the past 12 months, there has been much written in the press about the merits or otherwise of Pre Pack Administration – commonly known as Phoenixing. The pre-pack process involves setting up a new company which is then used as a vehicle to buy the assets of a failing business.

The advantage of Pre Pack Administration is that the new company can trade on without historic debt burdens such as onerous rent and lease agreements. However pre-packing can only take place if a cash lump sum can be made available. To complete a pre-pack, the old company’s assets must be purchased at a fair market price and the proceeds distributed to its creditors. Depending on the value of the assets, this may require a lump sum of many thousands of pounds.

With the current economic downturn, it is not always possible to raise the capital required to fund the purchase of business’ assets. Where this is the case, the directors may well be better off considering one of the other business turnaround solutions namely Company Voluntary Arrangement.

A company voluntary arrangement (CVA) is an agreement with the company’s creditors to settle outstanding debts in a manageable way. Creditors agree to receive reduced payments based on what the company can afford to pay. These payments last for a fixed period (normally 5 years) after which any outstanding debt is written off.

In this way, a CVA can enable a business to write off 50% or more of its debts while allowing it to continue to trade normally. The company remains intact and valuable resources are retained. The agreement takes into account all unsecured debts including those owed to HM Revenue and Customs such as PAYE and VAT.

Company Voluntary Arrangement requires no up-front cash

One of the significant advantages of the company voluntary arrangement over the pre-pack process is that it does not require any up-front cash. The company must be able to make contributions to its creditors each month but these are funded from ongoing trading revenues.

A CVA can only be implemented with the help of a licensed insolvency practitioner and therefore there are associated fees. No additional money will need to be found for this however as the fees are taken from the agreed monthly CVA payments.

An additional significant advantage of a CVA for company directors is that because the business is not wound up, there is no investigation into the activities of the directors. This means that the question of wrongful trading does not come up.

In today’s economic environment when many businesses are struggling to keep their heads above water, the opportunity to combine a restructuring programme with the ability to write of company debt can be a lifesaver. This is exactly what a CVA will deliver without the investment of any additional funds.

Derek Cooper is Managing Director of Cooper Matthews Limited. Why not talk to us about whether this could be a solution for your situation. More details at http://coopermatthews.com/company-voluntary-arrangement.html

Traditionally, if any creditor of a business owed more than GBP750 was struggling to collect its debt, that creditor could decide to petition for the winding up of the company. The motive for this action would not necessarily have been to receive payment of the debt. Given that the company would subsequently be liquidated, the expectation would have been that there would have been many creditors and few company assets. Rather, the action was intended to prevent the struggling business from continuing to trade and thus putting other potential suppliers at risk.

More recently, creditors have started to use winding up petitions specifically as debt collection tools. Rather than issuing a county court judgement (CCJ) which could then be ignored, creditors are choosing to issue the winding up petition because of the immediate pressure that this puts on the company to pay the outstanding debt.

Once a winding up petition is issued, it is advertised in the London Gazette. This advertisement will be identified by the company’s bank and this will normally cause the bank to suspend the company’s banking facilities until the petition is either granted or withdrawn. Obviously suspension of banking facilities will cause serious disruption and will hinder the company’s ability to trade. If the winding up petition is successful and the winding up of the company is ordered, a liquidator will be appointed and it is likely that the company will be closed.

Given these serious implications, as a company director, it is very important for you to understand your options if a winding up petition is received. If this were to happen you can consider the following possible actions:

1. If you believe the creditor’s claim is genuine, one options is to make every effort to pay the petitioning creditor so that the winding up petition is lifted. However, this may very well be to the further detriment of the business as cash will have to be diverted from other places if indeed any is available at all.

2. If you believe that the petition is unjust, you can contest the action. It is likely this will involve hiring a solicitor with associated costs. In addition, the company’s bank will have to be involved to ensure that accounts are not frozen. Unfortunately, there is no guarantee that the bank will agree to this.

3. You and owners of the business could decide that the company is not worth saving and agree that it should be wound up. If this is the case, it would be sensible for you to instigate a creditors voluntary liquidation yourself therefore giving you more control of who is appointed liquidator.

4. If you and/or the shareholders of the company believe that the business is worth saving you could consider undertaking a pre pack liquidation (commonly known as a company phoenix). A new company could be set up to purchase the assets of the old business and continue to trade leaving the old business to be wound up.

Given that an increasing number of businesses are facing difficulty trading in the current economic circumstances, far more creditor’s accounts are falling into arrears. Subsequently, the number of winding up petitions issued is on the increase. If you know that your business is about to receive a winding up petition or such a petition is received out of the blue, it is vital that you take advice from a corporate insolvency specialist as soon as possible.

As highlighted above, there are a number of options that you could consider. However, the implications of these are serious and far reaching and must be properly understood.

Derek Cooper is Managing Director of Cooper Matthews Limited, and a member of the Turnaround Management Association UK. Get expert advice and more information at http://coopermatthews.com/winding-up-petition.html