Business consultants can help craftsmen out of the crisis

If a craft business falls into crisis, it doesn't necessarily have to be insolvent. A liquidity tool can determine its solvency.

This article is part of the special feature GründerNavi – for founders and young companies

There are many reasons why a company might fall into crisis . "Perhaps it's poorly structured, the owner is overwhelmed, or they haven't got their calculations under control," says Carsten Bonß, citing examples. The result, however, is usually the same: In the end, there isn't enough money to cover outstanding payments. Insolvency looms . The business consultant at the South Thuringian Chamber of Skilled Crafts has developed a tool to answer a crucial question: Is the company still liquid , or is it already insolvent?

"In short, the rule is: If the managing director of a limited liability company becomes aware that their company is insolvent, they must take countermeasures within three weeks . If they fail to do so, or if it is clear from the outset that they will not succeed, an obligation to file for insolvency arises upon the onset of insolvency," Bonß explains, referring to the legal situation . Insolvency exists if the debtor is unable to pay 90 percent of their total outstanding liabilities within three weeks. If there is hope that the finances will recover, the Chamber of Skilled Crafts' business advisory service may become involved. Otherwise, they are not included.

Cash flows are examined

The tool – a multi-page Excel spreadsheet – documents the cash flows for three weeks plus the next three months . The cash reconciliation process lays everything on the table: "Outstanding invoices, order backlog, income and expenses, receivables, liabilities, cash and bank balances, debtors, creditors, and even private withdrawals from the business account," Carsten Bonß lists some of the points. The tool is linked to a calendar . This allows users to see exactly when customers have to settle their outstanding invoices or when the company has to pay wages, social security contributions, and VAT. Recurring liabilities such as overdraft interest and interest and principal payments are also recorded. A traffic light system indicates the specific liquidity status.

Restructuring concept helps out of the crisis  

"The Chamber of Skilled Crafts' business consultant is like a family doctor who sometimes also has to act as an emergency physician ," explains Carsten Bonß, drawing a comparison. Applied to a struggling business, this means: once the patient can leave intensive care, therapy begins. The restructuring plan aims to buy time and improve liquidity . Special fields in the Excel tool allow the business owner to add information on whether they can access additional funds to alleviate the financial pressure. Options include, for example , equity financing from family members or deferring payment obligations. "An extension can be negotiated with the tax office, so that the VAT isn't due for another month or two. It might also be possible to write off outstanding receivables, which would result in the business owner receiving a refund from the tax office."

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Establishing and Developing Liquidity Management : Keeping an eye on liquidity is important for companies not only in times of crisis, says Tobias Beibl, a staff member at the Ludwig Fröhler Institute and a doctoral candidate at the Technical University of Munich. Read here how the chambers of commerce's business consultants can help you establish and further develop liquidity management.

Not only available in times of crisis

In his 25 years as a business consultant, Carsten Bonß has observed that "many only come to us when it's already too late." A craft business can contact the Chamber of Skilled Crafts at any time for a check-up. All that's required is scheduling an appointment . After gaining an initial understanding of the company's financial situation during a consultation, Bonß provides the company with the liquidity tool, along with an 18-page manual , and gives a one- to two-hour training session. "Sometimes we're finished with the analysis right after that." The tool isn't just for emergencies. Bonß knows several companies that use it as a "basic liquidity plan" in their day-to-day operations.

Advice is free for craft businesses

Regular monitoring is important – for your own health, but also for the health of your business. "Even if all the figures in the tool are green, there could be a different trend," warns Carsten Bonß. To uncover weaknesses , the business consultants also examine the business analysis, the profit and loss statement, and the balance sheet. "From this, we can see whether the business is operating productively and draw conclusions about what can be improved." Can a craft business even afford this expertise? "Absolutely!" says Carsten Bonß. The consultation on business management, as well as legal or technical issues, is free of charge for businesses . "The consultations are partially subsidized by the federal and state governments and are a service provided by the membership-funded Chamber of Skilled Crafts."

Liquidity Tool – Available Only Through Chambers of Commerce and Trade Associations. Carsten Bonß developed the liquidity tool for the "Businesses in Difficulty" working group ( AKBiS ) at the German Confederation of Skilled Crafts ( ZDH ). Its primary purpose was to assist colleagues advising companies in difficulty. During his research, he came across a calculation example, which he modified for his own use. The key feature: "The VAT issue is taken into account with regard to statutory payment deadlines," Bonß emphasizes. The tool is available to advisors at chambers of skilled crafts and trade associations via the BISTECH platform.