Whether you’re running a start-up company or you’ve been director of a large firm for many years, being able to identify the warning signs of an insolvent company is very useful. The earlier you spot problems, the better chance you have of turning the business around, giving it a fighting chance of survival. Below are the top ten signs to look out for:
- Are you pointing the blame at everyone else? The business is your responsibility, not that employee, bookkeeper or accountant.
- You’re spending too much time dealing with creditors and sorting out problems rather than focusing on running the business.
- Your bank is acting suspicious by asking for more information, refusing to provide a loan or asking for increased personal guarantees or even an investigation by accountants.
- Too many late payers and often you don’t know how much debtors owe.
- Account and record keeping is poor and cashflow isn’t monitored properly. Accounts haven’t been filed at Companies House on time (if you’re a limited company).
- You’re unable to keep up with VAT or PAYE payments with HMRC or you’ve already missed deadlines.
- You’ve been threatened with legal actions and relationships with creditors are strained at best
- “We just need that one customer and we’ll be OK...” Don’t rely on the what-ifs. An optimistic mindset won’t save your company.
- Your company is no longer making profit but you continue to withdraw dividends at the same rate as before. You could be taking money that is owed to HMRC, resulting in tax liabilities. This is usually referred to as an overdrawn director’s account.
- You ignore calls and post, dread Monday mornings and have had too many sleepless nights to count (sounds like an obvious sign but worth adding!)
My business is in trouble. Now what do I do?
It can be a very worrying and stressful time if your business is facing financial problems but it’s important to remember there are options available to you. It’s also worth noting that you personally are not liable for the company’s debt, the company is.
Depending on your situation, a Time to Pay deal with HMRC or the formal Company Voluntary Arrangement (CVA) may be best if you need to restructure debt. If your company has been threatened with legal actions, administration may be a more suitable option as it can safeguard the business while a rescue strategy is prepared.
Whichever option you choose, it’s best to seek legal and insolvency advice to ensure everything is in order. As soon as you spot a warning sign, act as soon as possible to avoid any further problems.
This article was provided by Anna-Lisa Searle from KSA Group.