Many lessons can be learnt from Kwik Save's demise, and one of the most important is how to handle the human fallout.

This is a sad time for Kwik Save employees. Many of those employed at the 90 stores had been working for up to six weeks with no pay to help the management turn things around, all to no avail. Many are now facing severe financial pressures as they look for new jobs. How Fresh Express handles the human fallout will be a real test of its mettle, as will its ability to learn wider lessons from Kwik Save's demise.

For those whose stores have been saved by administration, the terms and conditions of their employment will be carried over to the new employee. This is guaranteed under the TUPE. For those who have been made redundant, the outlook may look bleak, but it is important to remember that they are entitled to certain protection from the National Insurance Fund and will be able to claim as a preferential creditor against the assets of Kwik Save, once they have been realised.

NIF payments are guaranteed - subject to statutory limits. Employees who had worked for up to six weeks without pay will be able to claim this back, up to an amount of £310 a week. They will also be able to claim for owed holiday pay to the same amount. They can also claim for failure to receive statutory minimum notice, but they must wait until their contracted notice period expires to make this claim. Though this can't compensate for the job losses, these provisions provide limited comfort at least. Of course, what will be left from the assets once secured assets and floating charges have been covered remains to be seen and, in many cases, unsecured creditors receive little or no dividend.

It's far too early to gauge the likely success of Fresh Express. Though it is free of Kwik Save's bad debts, it will doubtless look at the management and problem areas to make sure issues are rectified.

To avoid following in its predecessor's footprints, it will need to get its head around the strengths and weaknesses of the core business and take action at the first hint of a problem.

There are a number of steps that should be taken when the alarm bells start ringing in the minds of directors and management.

Two solvency tests should be carried out: a cashflow test to ensure there is enough cash to meet debts as they become due and a balance sheet test to establish whether the assets exceed the liabilities. If either of these tests confirm a problem, it's time to take advice. I can't overstate the importance of a good adviser. Put bluntly, the right adviser can make the difference between a fresh start and a liquidation. It sounds like a statement of the obvious, but it's also vital to stay on top of your finances. Financial information relating to the organisation must always be kept up-to-date and must be discussed at board meetings, which should be held regularly. If the right quality of management information is not available, people and systems must be put in place to provide it.

The board should study regular forecasts of cashflows and shortfalls and keep large creditors informed about any corrective restructuring or disposals. A general cost-cutting drive should include a moratorium on new expenditure and a review of third-party contracts.

It sounds simple, but Fresh Express should take heed. n

Patricia Godfrey is president of R3, the Association of Business Recovery Professionals