Spotting Company Insolvency Early
A client facing the early signs of insolvency could be regularly struggling with:
- Cash flow issues
- Constantly reaching credit limits
- County court judgments and high court writs being issued against the company
- Winding up petitions issued by creditors
- Late payments
- Director pay freeze
These signs can quickly escalate into company insolvency. To give your client the best chance of survival, advice should be sought as early as possible to avoid the risks of director’s liability for wrongful trading.
What services can we offer?
As an established insolvency practice, there are a range of services we can offer for business rescue, as well as insolvency procedures, if necessary.
Business finance advice
For businesses struggling to access funding, there are a number of alternative finance options available. We have a comprehensive guide on the various types of business funding for companies that are struggling with the threat of insolvency. The options detailed in the post may help get your client back on track and away from insolvency procedures. Our experts have dealt with many issues regarding cash flow and funding, and have built up relationships with lenders, therefore, we can provide an honest assessment of suitable solutions for your client’s company.
Review of cash flow
To understand how to fix the issue, you need to know where and when the cash flow issues started. A review enables us to identify where the business has been struggling, and what can be done to prevent further issues.
As your client’s accountant, we can work with you and your knowledge of the company to analyse potential future profit, providing a detailed plan of the business rescue operation.
If the business is heading for company insolvency, the risks can be magnified if your client’s private assets are threatened due to personal guarantees. Many directors or managers may struggle to consider the consequences of personal guarantees, which is where we can help.
Our insolvency practitioners can offer guidance on the pros and cons of personal guarantees, and outline the procedure for you and your client. We’ll provide advice on the possible implications of personal guarantees and support your thoughts on whether it is viable for your client. For more information on personal guarantees, we have an extensive guide available here.
Director pay freeze
If your client is simply continuing in business, struggling to pay creditors, let alone pay their contractual salary, it may be time to call it a day and consider voluntary liquidation. Not only can this reinvigorate the business if the assets are bought back through the liquidation process, but the director may also be able to recover their outstanding employment entitlements from the national insurance fund. If money is too tight to pay for liquidation, it may be possible to fund the liquidation from a redundancy payment. The monies leftover will go back to the director.
This new freedom from the burden of historic debt can revive a business which overwise has potential and ensure continuity of your client base in the long term.
Deal with communications
As part of instructing an insolvency practice, your insolvency professional will communicate with the company’s creditors. The threat of company insolvency can often lead to miscommunication with creditors, and it’s best to let experienced practitioners negotiate with creditors and provide a clear message on the future of the company. This could make all the difference in your client’s case, as the information will be concise, clear and highlight the issues.
Advantages of working with insolvency practice
Insolvency practitioners have experience in dealing with various business owners, directors and accountants. Therefore, they are able to provide a detailed plan of the best option for the company. At Robson Scott Associates, the team behind Business Rescue Expert, we offer:
- Dedicated consultants: Our Business Rescue Experts will work alongside you to understand the business and its cash flow, in an attempt to provide a plan for a profitable future
- Free initial consultation: You and your client will receive a free initial meeting to discuss the situation and plans for moving forward
- No threat: We will not work against the business, but will offer you a service designed to improve your client’s company and preserve ongoing business – hopefully to save it from the threat of an insolvency procedure
- Experts in the field: We have years of experience and knowledge of the industry to provide an extensive business rescue plan. We will work with you to make a significant difference to your client, whatever the best course of action.
If you would like to discuss anything mentioned in the article, or fear your client could be facing company insolvency or a damaging winding up petition, contact one of our business rescue experts directly.