An article in the March 2012 issue of Economia states that, “The recent recession has left Britain with thousands of ‘zombie’ companies – surviving rather than thriving.”
In an earlier article in the Daily Telegraph last September, Jeremy Warner declared that: “Britain has become a zombie economy. Capital is no longer being allocated efficiently.” He maintained that zombie companies were sucking up some of the limited capital investment available when it could be better employed in helping successful businesses to grow.
Identifying a zombie company
Here is our checklist of some of the characteristics of a zombie company:
- Reduced turnover
- Lower profits
- Reduction in market share
- Poor management information
- Operating at your overdraft limit
- Pay cuts and redundancies
- Loss of regular customers
- Regularly paying suppliers late
- Arrears of PAYE and corporation tax, with or without a Time-to-Pay agreement
- Breathing life into a zombie company
If the underlying business proposition is still sound, what may be needed is a fresh injection of capital to enable the company to invest in the future rather than just survive the present. This may allow the business to reverse the trends that have turned it into a zombie – increasing turnover and market share by investment in new staff, capital equipment or marketing.
The difficulty is acquiring this extra working capital when finances are already stretched and you may already be working at your overdraft limit.
One way that firms are increasingly turning to is invoice factoring or discounting. This releases the money tied up in your sales ledger, effectively selling your debtors for a cash advance. Invoice factoring has the added advantage of credit control, leaving you more time to concentrate on running your business.
