A business may need insolvency advice or be considered insolvent if it doesn’t have sufficient assets to cover its debts, or it is unable to pay its debts as and when they are due. If you monitor your businesses actual performance against your budget and the cashflow forecast regularly, this will give you an early warning of potential problems. You can then take action to avoid insolvency.
At tri group we would prefer it if nobody had to go through the pain of insolvency, that’s why we offer insolvency advice guides that provide information on how to reduce the risk of insolvency, by suggesting avoidance actions to take. Don’t wait until it happens; take some of our recommended steps to avoid it. Keeping cash flowing into the business is a challenge for many small companies. There are several ways to improve your cashflow situation:
Bill promptly – invoicing promptly and regularly helps ensure a steadier flow of cash into the business. Negotiate regular payments across the life of any long-term contracts.
Avoid overtrading – don’t continue to accept orders and try to fulfil them if you don’t have enough cash or resources to do so.
Recover debts – chase up any debts owed to you.
Trim your inventory – excess inventory ties up your cash. Take the time to plan a stock reduction programme.
Renegotiate your credit limits – adjust payment dates and credit limits with your main suppliers.
Factoring – sell outstanding invoices to a third party, known as a factor. Factors pay some of the debt off in advance of collection.
Sell surplus or underused assets – raise cash by selling under-utilised assets and then leasing them back. However, you must sell the assets at their true price and check whether the sale will result in a profit or a loss.
You can also approach your bank to discuss the possibility of extending your finance. Try not to worry the bank unduly, as they could call in any overdraft and make matters worse.
These are just a few small steps you could take on a regular basis. Talk to tri group for more in depth insolvency advice, corporate recovery advice and discuss how you can keep your company’s balance sheet healthy and avoid insolvency.