Recognising the threat of insolvency

In situations when bankruptcy, restructuring or insolvency threatens, businesses need to act quickly to find a solution.


The modern marketplace is riddled with risks and potential issues that could see even the safest businesses plunged into difficulty, part of the reason why recognising threats early is essential.


The smallest alterations to a business can cause many different outcomes, meaning decision-makers need to put a great deal of thought into each and every decision.


It is important to protect business interests when times are tough, as that represents the best chance of recovery in the long term.


Understanding the relevant laws and processes in these cases is also vital and many insolvency practitioners are on hand to provide guidance should your business run into problems.


Acting at the right time


All industries are complex and realising which situations represent the best opportunities and outcomes will be top of the list for many businesses.


But it is also important in the rush to set things back on the right path that essential parts of the process are not ignored or forgotten.


After all, a business that recovers from a negative situation will still have to trade once any measures have been implemented.


The warning signs of insolvency often present themselves early, but those focused on the everyday running of a business could easily miss them.


Furthermore, accepting insolvency is also important, as waiting and hoping that the situation will improve could worsen the predicament.


Warning signs to look out for


If liabilities exceed assets or debts cannot be settled then the first warning signs of insolvency are present, meaning insolvency advice should be sought.


Various arrangements can be reached, even if saving a business in its current state is no longer feasible – liquidation, pre pack arrangements and administration to name just a few.


Cash flow issues can also represent the first signs of financial difficulty, especially if payments cannot be made on time or if suppliers are chasing payments continuously.


Collecting money from debtors is vital as it will ultimately assist in the paying of other bills – otherwise one big circle of debt starts to develop.


Acting early and taking the right course of action could ultimately save a business, but it requires the warning signs to be both recognised and then acted upon.


By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

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