No business owner wants to deal with an insolvency situation, but unfortunately this is a reality for many small businesses in a competitive marketplace. If your company is unable to pay its debts, this is known as insolvency. Legally, a business can also become insolvent if its liabilities exceed its assets. However, there are steps that you can take to minimize your business’ risk of insolvency and ease the problems caused by insolvency. You may be able to substantially alter the outcome of insolvency by taking an informed and active approach.
Minimizing Risks
Cashflow forecasting and credit control are two practical ways to reduce risk, as good credit control will help to improve your balance sheet and lessen the chance of insolvency. Regularly updated cash flow forecasts will provide you with an early warning system so that you are able to put measures in place to guard against financial disaster. If you have friends or family investing in your business, they should offer a secured loan rather than buying shares. Some business owners are personally invested in their companies, meaning that their personal assets are at risk. In order to protect your property and possessions, you should incorporate your business as a limited liability company or limited liability partnership.
Quick Action Steps
If insolvency is a real concern, the first thing you should do is contact a specialist firm that deals with insolvency issues, such as Gibson Hewitt. They will be able to provide you with tailored advice and you should start to implement their suggestions as quickly as possible. Assess the outlook for your business. If it has good long-term prospects, short-term steps such as selling off non-essential assets or managing your creditors, may be able to tide you over the worst of it. It’s much better to act quickly, before the business is in real trouble in order to successfully ride out a financial crisis.
Insolvency Procedures
When the outlook for your business is bleak, it’s essential that you Find an Insolvency company. They will be able to talk through the options with you, and will inform you that protecting your personal position at the expense of creditors can be a criminal offence. The options available to you will depend on what form your business takes and what it’s prospects are, but they may include making an agreement with creditors, entering administration or winding up the business. Personal bankruptcy is the worst case scenario and shouldn’t happen as long as you address financial problems as early as possible.
