If your business is experiencing difficulty, insolvency may seem like the only way out. However, this doesn’t necessarily need to be the case. Not only are there many signs of business struggle that can be turned around well before insolvency occurs, but by reacting quickly, you can mitigate the damage to your business.
Impaired Cash Flow: A Sure Sign Of A Struggling Business
There are several ways to confirm that your business could be at the beginning of a struggle. One of the most common signs is when you are having trouble paying your suppliers or creditors, as and when they fall due. Often, creditors will have started calling to demand payment, and many business owners find themselves in a ‘robbing Peter to pay Paul’ situation, which can place them at risk of greater trouble.
Before long, it can seem as though you are trapped in a downward spiral of debt and the mounting worry of accrued interest. However, even at this stage, it is possible to reverse the situation.
Another warning sign of impending struggle is problems with stock. The inability to purchase the stock you need to fulfil orders, due to late customer payments is a common cause of several major business problems, including insolvency.
Equally, you can also struggle when you are holding too much stock. Doing this can place a strain on your working capital if not sold quickly enough, forcing you to take a loss if you need to discount stock in order to sell quickly. Although having too much stock may not be an issue if it only happens infrequently, but combined with other business problems, it can result in significant losses.
Acting Quickly Is Key
The good news is that, by calling professionals in for insolvency advice, your cash flow can be greatly improved. Contrary to popular belief, insolvency professionals don’t just deal with company closures; they are also incredibly valuable at the beginning stages of a struggle. Calling a professional before things get too out of hand is the key to improving your situation.
So what can an insolvency professional actually do for your company debt? Not only can they provide you with guidance about how to reduce your debt and improve your cash flow, but they can also negotiate, on your behalf, with the bank, HMRC and your other creditors.
A New Pair Of Eyes
Insolvency practitioners are not involved with your business, but are knowledgeable individuals who are keenly aware of how a healthy business functions. They can look at all of your business processes and easily point out which activities may have started your current problems, as well as provide advice about how to turn your current situation around, and prevent future problems from occurring.
There are several solutions which may be available to your business, depending on the struggle you are currently experiencing. If your business is starting to have cash flow trouble, it may be that invoice factoring is enough to help provide your business with emergency funds and a cash flow boost.
You may be in a better position to negotiate with your creditors by entering into a Company Voluntary Arrangement (CVA), as this option involves a formal proposal that potentially requests a longer period to repay your debts, or proposes that your creditors accept a reduced figure in respect of their debt.
Should your struggles be significant, an insolvency professional can still help your business to continue trading, by placing the company into Administration, whereby potentially the current directors could purchase the assets of the company.
It Begins With You
The first step to overcoming your business struggles is to admit that a problem exists. Not doing so will only make things worse, and lessen your business’s chances for a complete recovery as time goes by. The second step is to understand that insolvency professionals are the best way to get the business insolvency advice you need.
Get in touch with one of our qualified insolvency practitioners for impartial advice on business rescue.