Business insolvency means the inability of a business to pay off its debts, either because it can not pay its debts when they are due or it doesn’t have sufficient assets to cover its debts.
For a business to become insolvent it takes time, so it is possible to spot the warning sign if you look at your business objectively.
How to avoid insolvency by improving your cashflow
In order to avoid insolvency you could take the following actions:
- Invoice your customers on time and regularly: Keep up regular communication with your customers, and negotiate regular payments
- Credit control: Chase late payments, amend your customers credit terms if they constantly pay late and offer benefits for earlier payments
- Don’t overtrade: Don’t take on more orders then you can cope with
- Stock control: Reduce unnecessary stock and order small amounts regularly
- Renegotiate with suppliers: try and readjust your credit and payment terms with your main suppliers
- Consider Invoice Finance: Invoice finance and discounting means that you can get paid up to 95% of the value of outstanding invoices within 24 hours of your raising the invoice
- Sell assets: sell off any unused assets or lease them instead.
How to avoid insolvency by negotiating with your creditors
If you owe your creditors more than £750 then they can petition a court to order your company into liquidation. If your are struggling to pay your creditors, don’t just stop paying them, contact them as soon as possible and try to renegotiate a payment plan you can stick to. If your approach your creditors early and you are honest with them they will be more likely to help you.
How to avoid insolvency by reducing your overheads
If your business is suffering from financial problems you should review your overheads to see if you can make savings. Don’t make big cuts that will stop you from performing, instead consider making the following cuts:
- Advertising and research and development
- Staff costs, start by reducing over-time or hours, consider redundancies carefully as they cost more in the short term and reduce morale
- Investments – stop investing in the short term by leasing equipment
- Premise cost, consider relocating or sub letting part of your business premises
Get professional advice
In order to avoid insolvency it is a good idea to get some advice from a qualified insolvency practitioner. They have a vast amount of experience and they will be able to explain all of the choices that are available, and the risks and benefits of each choice, they can also help you put your chosen plan of action in place.
To understand the whole range of options and to get help choosing the right one for your business contact us on 0800 597 4757 or enquire online using the form opposite.
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