The word insolvency can strike fear into many a business and there are a number of consequences if your business does become insolvent. Many people don’t realise that early intervention can sometimes result in avoiding insolvency altogether and being able to continue trading so being able to recognise the early signs of insolvency can be advantageous.
There are a number of warning signs that may indicate that your business may be in trouble and some of these signs of insolvency are:
All of these factors indicate that your business is almost certainly heading towards insolvency and that you should do all you can at this stage to try to address these issues head on, but what can you actually do to try and avoid insolvency and what happens if this is not possible?
First and foremost it is important to realise that any of your creditors can actually apply for your business to be wound up through the courts if you owe them more than £5,000 and once this is in motion is can be difficult to put the brakes on.
Therefore, it is a better option for you to try to address your concerns first, before being forced to wind up your business.
Addressing your cash flow issues should be a good starting place. If your business is constantly owed money by customers, then you are not going to be in a position to pay your creditors. Good credit control, such as implementing strict payment terms, invoicing in a timely manner and keeping on top of outstanding invoices will all help to improve your cash flow. Refusing to deal with clients who do not pay their invoices on time may be concerning for your bottom line, but if getting paid takes 3 months, this may not make good business sense.
You may want to consider if there is any way to restructure your business. Is there a part of it that will be attractive to another business who could purchase it as a going concern? If you did sell it on, would it significantly reduce your overheads so that you could continue trading? If so, this is an avenue worth exploring.
However the window for any type of restructure in these circumstances is small and you must act quickly, so take advice as soon as you can.
Where none of these option is viable, your business may go into insolvency and this will leave you with a number of options, which you should discuss in detail with an insolvency expert to find which one suits you best.
If you would like more information about how to avoid insolvency and what you can do to help your business, please call our experienced team now on 020 7490 5861 or complete a short online enquiry on our website and we’ll be in touch with you shortly.