Is insolvency avoidable?

Is insolvency avoidable? In many cases, yes.

If you’re worried that your current business financial issues might be insurmountable and you could be facing insolvency, then you may be wondering what to do next.

Read our advice about some concrete steps you can take to keep your business solvent.


Four ways to avoid insolvency

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No matter how bad the picture seems at the moment, there might be ways to alleviate the pressure and avoid entering the insolvency process altogether.

We share four positive actions you can take to avoid insolvency and get your business back on the right track. Should you need further expert advice after reading this article, then our experts are just one call away, so don’t hesitate to contact us.  

Analyse and improve your cash flow

Even profitable businesses can run into cash flow problems.

If your current financial issues are a result of squeezed income then there are some tactics and approaches that you can adopt to try and unclog your incoming payments and get the cash flowing into your accounts again.  

  • Do you have any unnecessary or underused stocks or other assets within your business? While they are nice to have on the books or look at, their value could be depreciating so if they are not being used then maybe they could be sold to inject some more liquidity into your business.
  • Are your payment terms and invoicing procedures up-to-date or too generous?  It might be time to look at them more closely and see if you can negotiate payment terms with existing customers and ensure that you are invoicing regularly, on-time and accurately.
  • Are you leaving money on the table? If you are owed any debts or payments by customers or suppliers than call them in. Take action to recover them if they are long outstanding.
  • If you need a more immediate cash injection then consider factoring or market invoice finance. Some suppliers can offer this service which will pay you a percentage of your outstanding invoices in advance. Read more about this kind of funding here.
  • Amend your own payment obligations if possible. If you are expecting bills and payment demands to land then contact your suppliers and negotiate extensions with them or see if you can adjust your payment and credit limits.

Reduce your overheads

Every business has overheads that have to be paid and reducing them is a difficult process but it can be done especially when there are no more alternatives to try.

The most important factor is identifying what core functions and roles are absolutely essential to your business. Would it cease to function if this element was removed or reduced?  Once you have identified these untouchable zones then you can look at other areas that could be reduced.

  • Do you require staff to work overtime or has it become an accepted habit for you and them? Do you require the current number of staff to work the current number of hours? Could some positions be temporarily reduced to help alleviate the immediate financial pressure?
  • Do you have to maintain your current levels of “soft” business expenditure such as advertising, PR, marketing, social media etc? Can you temporarily cut back on research and development spending and investment which you can revisit in the future on a stronger footing?
  • Do you need all the space in your current premises? If you are reducing your excess assets and stock, do you need to keep paying your current overheads at this location?  If you are contractually able, then look at the short to medium term costs of relocating to a more affordable home base. This does not necessarily mean trading down in terms of working conditions for staff – newer premises often have updated facilities, parking and access that older buildings don’t and can’t.
  • Review planned investments – delaying gratification can be good for the soul and can also be financially beneficial for a business in straitened circumstances. If you are planning on purchasing items or services to expand the business then consider whether the payoff timescales are worth it at the moment. Similarly, if you have any equipment or plant purchases then revisit your options – can they be leased rather than purchased outright? Do you have to hire new staff for a role or can you use freelance practitioners or temporary workers rather than commit financially to a whole permanent position.

Negotiate with your Creditors

Whether it’s suppliers, subcontractors, tradespeople or even the HMRC themselves, it is important to speak with any creditor as soon as you can to negotiate some breathing space.

It can be easy to ignore financial downturns as a blip, convinced they will turn around by themselves soon enough but it can equally be dangerous to bury your head in the sand and ignore requests from creditors for payment.

The sooner you open dialogue with creditors, the more time you have to negotiate more favourable terms and work on improving your businesses financial conditions

Seek expert advice

When does a slowdown turn into a slump? When is a small financial setback a terminal event for your business?  What if one bad month turns into six or more?

Nobody knows your business better than you and nobody is better positioned to judge how serious current issues and headwinds affecting your company are but even the best businesses seek professional advice and guidance from time to time – whether it’s to confirm their own intuition or to see what a fresh view of their business landscape could reveal.

An insolvency expert can give you the timely, impartial advice you need that could be the difference between making a slight course correction and having to abandon ship.

Seeking professional advice early gives you the maximum amount of time to uncover and assess the options available to you.

Contact us today and arrange a free consultation with one of our expert advisors. We will be able to advise on whether insolvency is inevitable or not and help you draw out a roadmap for the best outcomes for you and your business.

Email us at ask@businessrescueexpert.co.uk or use our contact form here.

 

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