There are some tell-tale early warning signs that a company is heading for insolvency that all company directors should be aware of. Being able to identify these and take the immediate action needed is a vital step when handling insolvency.
What is insolvency?
A company is technically insolvent on a cash flow basis, when it is unable to pay its debts as they fall due, or on a balance sheet basis, when its debts outweigh its assets.
It can be easy for directors to miss the signs that their company is heading towards insolvency, putting things down to run of the mill cashflow issues or inefficiency within the business.
So what are the warning signs of insolvency you need to make yourself aware of?
The Warning Signs:
- Constant cash flow issues
- Struggling to pay employees
- Experiencing pressure from creditors
- Maxing out your overdraft every month
- Spending more time focussing on your finances than running your business
- Court claims or debt recovery letters
- Struggling to meet your obligations under a ‘Time to Pay Arrangement’ with HMRC
If you are experiencing any of these issues, it is time to take urgent action.
Are you heading towards insolvency?
The first step is to determine if you are on your way to insolvency, or are already there!
As soon as you are concerned you should seek professional advice, don’t worry about the cost most Insolvency practitioners will provide an initial consultation free of charge
Look at your Balance Sheets, do you have more liabilities than assets?
What about your cash flow? Do you owe more than you can pay? Are you robbing Peter to pay Paul.
Has legal action already been taken against you? If you have received a Court summons or statutory demand, the next step for your creditor may be a Winding up Petition, which may lead to the liquidation of your Company.
If you are worried about the financial state of your company, you must act now. Company directors who continue to trade when they know or ought to know that there is no reasonable prospect of avoiding insolvency face the risk of being fined, being held personally responsible for the debts of the company or facing disqualification from being involved in the management of a Company.
How can we help you
At McLenan Corporate, we have over 30 years’ experience in supporting businesses through business recovery and insolvency processes. If your business is viable our priority will be to help restore its financial health & wellbeing, allowing it to survive and thrive. We offer a free, no obligation review of your circumstances allowing you to make an informed decision about the future.
You can contact Margo McLenan, our licensed insolvency practitioner with confidence today on 0300 303 4494 or email margo@mclenancorporate.com
It is so important to act and not isolate yourself in worry about your business debt. The earlier we can be involved, the more options there will be for your business.