Can a business in trouble afford insolvency advice?

Insolvency practitioners are a valuable investment that can help you immensely during hard times. Their fees vary according to a variety of factors: the industry, the complexity of the situation, or their location. It is hard to estimate how much an insolvency practitioner will cost, but for a company in trouble, they can seem expensive.

However, choosing to seek insolvency advice early on, while there is still a chance you could turn your business’s fate around, might be one of the best investments you ever make. And, despite what you might think, it is affordable.

Spotting early signs of insolvency

An insolvent company is one at risk of closure. In the first quarter of 2018, there were 3,992 company liquidations because of insolvency. The business may not meet financial obligations when they are due, or the total value of the company assets is less than the money owed. Recognising the signs of insolvency as early as possible gives you a chance to save your company and start a turnaround.

Some typical signs of insolvency may include:

  • Using your home as financial collateral
  • Using personal credit cards for business activity
  • Sacrificing your monthly wage

If you ever get to a point where these signs show up, it is time to get insolvency advice. Even before these signs arrive, you might notice falling profit margins and poor cash flow in your business, which are symptoms of dangerous underlying problems that could lead to insolvency.

If you take advice when problems first start arising, it is more likely that you will still have enough funds to pay for professional help. In this situation, the advice you’ll receive will be invaluable, and it might just save your company.

What does insolvency advice involve?

The work of an insolvency practitioner can take many forms. They can simply be used to offer your business advice. For example, they may look at the structure of your business, and your processes, and suggest how to strengthen your cash flow.

If they find that things are worse than expected, they can get the ball rolling on Company Voluntary Arrangements (CVAs) or creditors voluntary liquidation. Or, they can advise on these procedures and the next steps to ensure there are no surprises for you up ahead.

The costs

The cost of voluntary liquidation is typically between £4,000 and £6,000 pounds plus VAT. If you seek advice early enough to solve your business problems, paying the practitioner shouldn’t be too much of a burden considering the money they will help you generate.

If you need the practitioner to perform liquidation, the costs incurred will come out of the selling of the company’s assets. As a limited company, the director is not personally responsible for the debts of the business, but if the asset realisations aren’t sufficient to cover the costs, you may need to pay some fees yourself.

So while insolvency might seem like a big beast to overcome, it doesn’t have to be the mountain you make it. With advice and assistance, the process can be an easier one and, hopefully, turn your fortunes around.

If you get into financial difficulties, Irwin Insolvency is here to support you with a blend of extensive commercial expertise and a touch of realism. If you are seeking insolvency advice, get in touch with us as soon as possible on 0800 009 3173.

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.