North East suppliers of troubled steel giant SSI need to be prepared and proactive about their commercial futures – but they shouldn’t be panicking.
That’s the view of Allan Kelly, chair of insolvency trade body R3 in the North East and a restructuring partner with Baker Tilly North East, as efforts continue to prevent the mothballed Redcar steel plant falling into insolvency.
Kelly is advising the dozens of companies around the North East that currently trade with SSI and may be facing uncertainty themselves to be acting now to both try to identify new business opportunities, and to be communicating openly and clearly with their creditors, funders, staff and other customers about their ongoing trading situations.
Allan Kelly says: “Having any dominant company in a particular location can lead to an almost stand-alone mini economy made up of dozens of supply chain companies across the surrounding area, but while this amplifies the local economic benefits in the good times, it can have an equally exaggerated effect when problems arise.
“This is a desperately difficult situation for SSI and everyone associated with it, and the hope remains that a solution can be found for SSI that will enable its trading relationships with regional suppliers to continue. However if the worst does happen, there may be clear impacts on its suppliers cashflow, turnover and bad debt situations, as well as their ability to sustain the jobs they currently provide.
“While it would be easy for company owners and management teams to panic about where they would go in that instance, it’s essential that they avoid doing so and instead focus on taking a planned, strategic approach to finding new contracts and opportunities that could contribute to securing their future viability.”
Allan Kelly believes there are a number of different ways in which supply chain companies can reduce the impact of any potential cashflow issues arising, at least in the short term.
He continues: “A number of business creditors and suppliers may take a pragmatic view of cashflow difficulties, as it’s better for them to get a bit less over a bit more time than it is to end up getting nothing at all from a company that goes out of business.
“Understanding your company’s’ finances including preparing short and longer term forecasts will be necessary to evaluate any adverse impact. Talking to your funders and investors should be high on management teams’ To Do action list, to demonstrate their plans to take things forward and what sort of additional financial input they might require to do so.
“The Time To Pay scheme that’s still offered by HMRC can provide an opportunity to spread out Crown payments including VAT and PAYE that are due, and the earlier your situation is flagged with HMRC, the more beneficial the dialogue is likely to be on any application that’s made for such leeway.
“The best way for any company owners and management teams to address financial concerns is always to proactively seek early advice from a qualified source such as an R3 member as soon as potential issues become apparent, so they have the opportunity to do something about them before it’s too late.”