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Computer Supplies Distributor

Updated: 14th February 2007 (PM)

A Computer Supplies Company saved from receivership!

The Business

A £6m turnover, long established, Computer Supplies business, had experienced a number of "exceptional" costs during 2006. This had a major impact on the business taking approximately £300K out of its cash flow.

This amount was "absorbed" in the short term by non payment of VAT/PAYE, extending creditor repayments, constant overpayments from the invoice discounter, and unauthorised overdraft usage.

The risk

Although the trade creditors and the Crown were being "held" by the directors, the Invoice Discounter appointed reporting accountants, to urgently review the cash situation and the long term viability of the business.

Unfortunately, cash flow was only going to get worse as December (2 weeks sales and 4 weeks of overheads) was approaching.

The accountants reported that the business was not going to be able continue without a large injection of funds. Not surprisingly, the discounter commenced an "informal collectout" only releasing funds for critical suppliers.

We were asked by the directors to urgently refinance this business away from the discounter, before the end of the month. They suspected the discounter would appoint receivers before November's wages and salaries had to be paid.

The solution

We notified the discounter, the bank and the reporting accountants of our involvement. It was important to have constant dialogue with these parties and keep them informed, as we assisted the business

We arranged for the November and December payroll to be covered with a payroll finance facility. This avoided asking the discounter for the funds at the end of the month.

Our consultants then arranged a moratorium on the crown debt. A suitable repayment schedule was agreed, taking into account the businesses cash flow and moulding the repayment profile around seasonality factors.

Through these two courses of action, we put £330k back into the cash flow.

With the threat of receivership, now removed, we then arranged to transfer the Invoice Discounting line to another CID provider. This released even more funds as they wern't ratcheting the facility down.

The business traded through December, it is now financially secure and more importantly - 50 staff enjoyed their Christmas!