More and more companies have become Zombie Companies over the last few years as demand for their products and services has fallen due to the economic climate. The companies are in a state of stagnation, their priority being to service their bank loans in order to stay afloat, fighting to avoid the need to go into administration. At the end of 2012, according to R3, the trade body for the insolvency industry, there were 160,000 zombie companies, a 10% rise in just six months.
In the current economic climate with the base rate continuing to be held at a record low of 0.5% these companies are barely able to service their financial debts, leaving them little or no money in which to invest in the business in order to grow.
There will be potentially further problems for these companies when the economy is deemed to be recovering and is healthy enough to hike interest rates to control inflation, as these hikes will be passed directly on to the companies by their banks. It is when this happens, that sadly, and perhaps surprisingly more companies may find themselves at risk of being put into administration.
Unfortunately, these companies cannot do anything about the state of the economy. However they can pro-actively look to reduce their costs and unlock money, with which they can reduce their debts and begin to invest for the future.
A proven way of effectively reducing costs is by engaging Auditel. We will reduce the costs, whilst also looking for retrospective rebates, which releases funds and frees up the time of the company owner to concentrate on doing what they do best – running the business.