Insolvency is the last thing a business wants to have to face, but sadly, it’s an all too common problem. A total of 4,308 companies entered insolvency in Q3 2018, including 3,083 creditor’s voluntary liquidations (71.6%), 741 compulsory liquidations (17.2%), and 484 other insolvencies (11.2%).
But if you’re facing insolvency, it doesn’t always have to be the end of the line for your business. There are a few things you can do to make the best of a bad situation.
Seek early advice
If your business is facing insolvency, you shouldn’t underestimate the value of seeking advice as early as possible. It could help you solve your cash flow problems and get you out of insolvency before the situation worsens.
Advisors can guide you on:
- The best ways to cut costs
- How to proceed after becoming insolvent
- When to stop trading
Advisors can prevent you from becoming insolvent in the first place. If you are not yet insolvent but fear you might be soon, the best time to seek advice is now. There are many threats facing business at the moment that could lead to severe cash flow problems.
For example, Brexit, interest rate rises, HMRC attitudes, and changes to creditor bank’s policies can all impact your business. Expect there to be changes and seek expert advice as soon as possible to keep your business on track.
Be open with creditors
Creditor’s interest should be the main priority for you as you should be aiming to minimise their losses. If you approach them in an honest, open manner, you are more likely to gain their trust and be able to show them you have their interests at heart.
Provide creditors with accurate information about your situations and keep them in the loop. Try to maintain a smooth line of communication to avoid seeming untrustworthy.
Don’t use your own money
There is no legal obligation for you to use your own money to try and save a business from liquidation with a limited liability structure. Many people, especially when they built the business from the ground up, get emotionally invested in preserving the company, and in turn, they suffer substantial financial losses.
Sometimes, money isn’t enough to fix a business facing liquidation, so save yours and seek the best professional help who can advise you where to go next.
These three tips should help you make liquidation safer and easier, but, they aren’t enough to create a turnaround for your business alone. You need the help of experienced business insolvency advisors at Irwin & Company who can sit down with you and find ways to help your business recover or use creative ways to provide positive outcomes in this situation.