Vertex Law

Businesses in the south east face lean times for the foreseeable future but have been warned to avoid a “slash and burn” cost cutting policy if they want to survive.

That was the message at Navigating the Downturn, a seminar jointly hosted by Kings Hill-based Vertex Law and accountants BDO Stoy Hayward and attended by an invited audience of business owners, directors and representatives of the banking industry on June 25.

Speaking at the event, Stephen Cooney, Director, Operational Performance Improvement at BDO, who specialises in advising corporations on operational restructuring, warned against adopting a “slash and burn” approach in hard times.

“All cost cutting has to have science behind it,” he said. “If your three-year business plan is reliant on efficiency improvements and cost reduction then they have to be achievable targets – if not, the company will fall over.”

He warned this was especially important when reducing headcount, which shouldn’t be carried out across the board until productivity improvements were in place to enable work to be delivered by fewer people.

Rupert Merson, Advisory Services Partner at BDO, warned: “There are lean times ahead for quite a while yet. You have to be aware of the opportunities out there.

“The last six recessions have shown us that customers don’t just spend less when times are bad, they spend differently.  Look for recession-proof customers and sectors and remember that you are most likely to succeed where you know the business best.”

Jo Gilbey, a Partner in BDO specialising in Business Taxation, warned of the Draconian penalties facing directors and companies if accounts are filed late or contain errors.

But she added that HMRC could help free up cash through a tax deferral. “Some £2.4bn in tax has been deferred ¬¬– that’s companies effectively using HMRC as a banker rather than going to the banks themselves. If you are cashflow restrained you really should be thinking about talking about a deferral.

“If you are not in a position to make a payment, begin dialogue with HMRC early. They are being very generous at the moment and doing what they can to help.”

The seminar wrapped up with a detailed look at the legal responsibilities of directors, particularly in relation to companies facing financial distress and at the technicalities of buying a business from an Insolvency Practitioner.

Matthew Tait, BDO Business Restructuring Partner noted that: “Where going concern issues are faced, a balance has to be reached between maximising the outcome, managing risk and adhering to your directors’ duties. It’s not easy, but it can be done.”

Speaking after the event, James Beatton, a Partner in Vertex Law, said: “We are delighted to have hosted what was an extremely successful seminar.

“In times as difficult as they are now it’s always useful for business owners and directors to be briefed on the latest regulations and pick up some tips from professionals on how to make the system work in their favour.

“The feedback from those who attended has been very good and we hope everyone went away having picked up some new information and ideas to help them through the downturn.”