As former business bankers, our business finance team, have a 360 degree perspective and speak from experience to offer 5 tips to clients tackling a challenging annual review.
- Provide context to your situation - your story of the last 12 months. This garners empathy for your situation and may also illustrate the one-off or short term nature of the impact that contributed to your current position.
- Focus on the forward 12 months in a budget with realistic assumptions you can explain and can support with historical trading drivers. If there are major changes or variances in your budget projections from historical results, have evidence to support how these changes are going to come about. Be prepared to invest in a 3-way cashflow if your situation justifies this. This demonstrates you have a plan and a handle on your numbers.
- Propose how the Bank can support your trading on. Be specific: defer principal reductions, suggest a moderate limit increase, or facility renewal for a shorter term to give you time to deliver into budget, as examples.
- Articulate a Plan B if you can’t hit budget assumptions. Your banker wants solutions to problems.
- Prepare for the meeting together with your accountant so that you can both add weight to your credibility to do what you say you’ll do during the meeting with your Bank.
Where possible, be assertive, many borrowers make the mistake of under communicating when the going gets tough; that is precisely when you need to be communicating with your Bank. It demonstrates that you are aware of your obligations and actively working towards meeting them in the face of hurdles. Bankers have funding limits or authorities. Understanding what that is and who the decision maker will be to sign off your preferred outcome will help in positioning your case.
Finally, don’t underestimate the power of having your Accountant and/or a finance consultant representing you in these meetings. Negotiations that are intermediated by experienced professionals will, more likely than not, garner far more favourable outcomes. It can also remove you from the pressure of making on-the-spot decisions without fully considering the financial impacts. Should you be faced with a challenging annual review, please contact your usual Mazars adviser or one of our Finance Team experts Owen Dingle and Angela Winton on +61 7 3218 3900 for guidance and advice through this important process.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.
Thanks to Patrick Stafford for your contribution to the content