If you’re running a business, it’s important to keep a weather eye on your company finances. That way you can nip financial problems in the bud before they turn into a full-blown crisis. Insolvency, for example, can be catastrophic – both for the company itself and its creditors. It can also put the directors personally at risk of accusations of wrongful trading.
If your business is insolvent, it means you can’t pay your debts as they fall due. This can be a result of poor cash flow or because the value of your liabilities outweighs your assets. The latter is known as balance sheet insolvency and occurs when the assets listed on your company’s accounts are less than the total value of its debts and other payables.
Despite this, many businesses Business Insolvency Company are able to turnaround their insolvent positions. However, the earlier you recognise the problem and seek help from an expert, the better your chances of success.
A licensed insolvency practitioner can offer you advice that outlines the formal and informal options available to you. They can help you restructure your debt or even negotiate a company voluntary agreement with your creditors. In some cases, they may also be able to assist you with refinancing your business or even bringing in a new partner to take the company forward.
It is very easy for directors of small and medium-sized enterprises (SMEs) to miss the warning signs of insolvency. They may assume that a dip in cash flow is a temporary blip and not something more serious. This is why it is crucial to maintain accurate records of your company’s performance and to monitor your debt levels carefully.
The Office for National Statistics’ latest Business Insolvency Survey (BICS) revealed that the printing and reproduction of recorded media industry is at a higher risk of insolvency than ever before. In fact, it accounted for the second highest number of insolvencies amongst all industries in Quarter 2 2022. It is followed by the manufacturing sector and the wholesale and retail trade industry.
While this does indicate that the industry is struggling, it’s important to remember that the BICS highlights perceived risk rather than actual insolvency. So, if you are concerned about your company’s cash position, it’s worth seeking advice from a licensed insolvency practitioner sooner rather than later.
An insolvency expert will be able to help you assess your current position and recommend the best course of action going forward. They’ll guide you through the process and ensure that all your options are explored so that the best outcome is achieved for your company and its creditors. It’s important to act quickly, as if you carry on trading whilst insolvent, you could be putting your own position at risk and jeopardise the chances of successfully turning your company around.