If you’re a business, then you don’t ever want to run into serious problems with your finances. You need to be prepared for the worst that can happen, whether that includes losing track of your finances, overspending, or slipping into a repayment crisis if you are finding it impossible to make payments.
It’s important to understand the warning signs of company insolvency so that you can act as quickly as possible to rectify the situation.
What are the Signs of Company Insolvency?
If your company appears to have regular cash flow problems, this is your first red flag. Any form of problems with money coming in compared to money going out means that you’re at higher risk of accruing debt and being unable to pay certain items back.
It’s important to remember that the biggest cash flow problems come from your business not even being able to cover the standard running costs and expenses. Cash flow problems don’t necessarily mean that you can’t afford to make extra payments, new purchases or growth decisions, but they are more focused on you struggling to pay the very basic necessities of your business’s running costs on top of everything else.
Struggling businesses which are dealing with all manner of debt and losing grip of their finances may be spiralling into company insolvency and in dire need of assistance. If you are worried about business insolvency, then you can always contact an Insolvency Practitioner to help you.
Other signs of business insolvency risk include: always reaching your overdraft limit, constantly dealing with business and financial problems, being chased by debt collectors or creditors, visits from bailiffs to your place of work and being unable to pay the standard wages of your staff members.
Crucial Methods to Prevent Insolvency Within Your Business
If your business is clearly suffering from financial issues, it’s never too late to take appropriate action and prepare yourself against complete insolvency. The key thing to remember is that it’s always a positive when you notice that there are financial problems, and make the conscious decision to do something about it. The businesses that ignore debt problems and sweep issues under the rug will never be able to escape their downfall.
Methods to prevent insolvency can include the following:
- Have a clear invoice structure. Always invoice as soon as possible with clear due dates, and make sure all late payments are chased up with clients. Invoice as and when you can to promote a better cash stream, rather than leaving all invoices until the last day of the month.
- Get a handle on your accounts and administration. Problems will more easily be noticed when you have a clear system you can keep track of. If you do not have a substantial financial and admin system, you risk losing track of information and payment status.
- Manage your stock better. You want to avoid paying for high levels of stock before sales have been made, especially if older stock needs to be sold more quickly. Manage your inventory and stock in a better way.
- Avoid overtrading. Don’t ever do anything more than what you are capable of doing, financially or otherwise. You don’t want to risk high levels of debt because you are overtrading.