Informed financial planning advisors pass on their wisdom to clients. If a company fails they will naturally look at back at this advice. In this TV show Doug Hall discuses throwing the spotlight on professional advice.
For example auditors, we are dealing with a number of cases, where a company has failed, and if the company had not failed there wouldn’t be an issue. But in the company going into administration for example, major creditors had lost and they may say that they have relied for example on audited accounts to make decisions, to lend money or to support the company and in the cold light of day the company having failed, that’s an example where you may go back and look at what the auditor said in earlier years. So we have situations arising from insolvent companies where the spotlight is thrown onto a whole range of professional advice that they were given before the company failed. Which never would have come under that spotlight if the company hadn’t gone into administration for example. It's not an area that we get involved in but valuers have seen a big increase in the number of actions against them very simple because the banks relied on valuations of properties for example, and then when the company has gone into administration and the bank has lost out, they then go back and look again at the professional opinions that they relied upon, in making their original lending decisions.
Inside Finance will continue to produce great videos on informed financial planning advisors and similar subjects.
Often they don't spot it early enough and it's often dangerous for directors to ignore some of the warning signs.
They get into difficulties for many different reasons, they may be in a recession hit sector, they may not control their working capital facilities very well, they may have inadequate or inappropriate working capital facilities.
They may be a poor management team. There are lots and lots of different reasons why businesses can find themselves in financial difficulties.
Sometimes it's the fault of the management team and sometimes it's outside of their control.
Ultimately what causes businesses to reach the point of failure is that they run out of cash, that is the case in the vast majority of the circumstances we see.
Other causes may be, for example in the current environment where leading up to 2007, for example, we saw banks lending quite aggressively, now they may be... they have lending assets which have decreased I value. And so companies may, for example, have failed their banking covenants and that's a potential risk for failure as well.
But often it's the cash, cash running out, not being able to pay the VAT bill or the rent or the wages.