How can a business avoid business insolvency?
Posted on 26th April 2020 at 15:51
It’s estimated that total of 17,196 companies entered insolvency in 2019, a rise of 6.8% on 2018 and the highest level of underlying insolvencies since 2013. With these shocking statistics ever looming it’s imperative you can identify the early warning signs and take immediate action to ensure your business doesn’t follow suit. Businesses must be able to meet their debt obligations and put into place suitable measures should they fall behind to avoid insolvency.
Business insolvency occurs when a business is unable to pay its debts on time or finds it doesn’t have sufficient assets to cover its debts. Business owners have a duty to keep a close eye on the company’s performance and bank balance and take immediate action should cash flow become a problem.
To avoid business insolvency, you must remain in control of your cashflow. Try to invoice your customers on time and regularly and where possible negotiate regular payments from customers with long-term contracts. Don’t let late payments go unchallenged and remember to chase your debts. You could think about selling under-used assets and leasing them instead and it wouldn’t harm to reduce any unnecessary stock, plus have conversations with your suppliers to renegotiate prices.
Secondly, never ignore your creditors. Instead, negotiate with your creditors to avoid insolvency. Payment plans can be set up over a fixed term which help you manage your debt appropriately and pay it back in instalments.
Thirdly, try to reduce your overheads. At the first sign of trouble, it is important to review your expenditure and tighten your belt. You could think about reducing staff costs and premises costs and tightening your budgets.
Fine tune operations within your business by optimising your business administration systems. Looking at your system in a strategic way helps you to optimised systems which allow you to monitor cash flow and identify missed payments…. it gives you a reactive and proactive planning tool. Having a keen insight into how your business operates is extremely important and gives you quick access to financial facts and figures. You must be able to find out how much is owed to the business by your own customers and the likely estimates for cash flow over the forthcoming months.
Finally, try to control your debtor payments and don’t be afraid to seek professional credit advice. Seeking the expertise of trained staff could mean you avoid insolvency and help to save your business. Here at Creditreform our aim it to help to make your business relations more transparent, to avoid losses and to reduce risks connected with your business activities. We provide online and bespoke commercial reports in the UK and internationally through our group offices and partners worldwide. Our expertise in debt collection successfully recovers billions of Euros every year and our services have been optimised and extended allowing us to provide a full and comprehensive credit management service worldwide.
For more information about Creditreform or to discuss your concerns regarding business insolvency, please call 0121 442 5330, alternatively email [email protected].
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