When a business becomes insolvent there are a host of measures that can be put into place to aid recovery. Business turnaround specialists are experts in this field and will have a wealth of experience. They can also often identify the root cause of the problems that your business is experiencing, whilst helping you put in place the measures needed to turn your business around.
Business insolvency means the inability of a business to pay off its debts. There are two type of business insolvency:
- Cash flow insolvency, this is where a business is unable to pay its debts when they are due
- Balance sheet insolvency is when a business has negative net assets, so in other words their liabilities exceed their assets.
Being insolvent does not necessarily mean that you are bankrupt. Bankruptcy is declared only once a court of law has declared that you are insolvent, with resulting legal orders intended to resolve the insolvency.
Causes of insolvency
An indication of insolvency is when a business finds itself struggling to pay its creditors, this may be a one off situation, because of the late payment of one or more of its large customers or it maybe that the business is always nearing the maximum of its overdraft limit, and constantly looking for new forms of credit.
Insolvency may be caused by the businesses customers taking longer to pay, which then means that business has to delay payments to its creditors like VAT and PAYE, it may also mean that the business struggles to buy new stock because of outstanding bills with its suppliers. Whatever the cause, the business needs to realise that it has serious cash flow problems.
Insolvency is confirmed when one or more of the businesses creditors take legal action to recover its debts. All businesses can be at the risk of insolvency, particularly if it they are reliant on a small number of customers, who have become slow payers.
In order to begin insolvency recovery it is advisable to get advice from a business turnaround specialist, or an insolvency practitioner. They are experts in this area and will be able to determine what measures the business should take.
Insolvency recovery may involve improving cash flow by:
- Selling off assets
- Invoice discounting
- Invoice factoring
- Asset finance
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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