When someone contacts us because they are worried their business may be insolvent, the first advice we give to them is ‘not to panic’.
We know that it is hard in the circumstances but it is really important that you stay calm and understand what you need to do for the best. The right approach to take if you think your company is insolvent is be honest with yourself about where you are with your finances, then call us and we can plan what to do together. At this stage, we need to work to the reality of the situation and look for the best outcomes.
Below is some advice on things you need to be thinking about.
· ‘Cash is King’ is a common saying because it is usually true. Many Companies who turn to us for help have simply run out of cash. You need to know where you stand so a cashflow forecast is essential.
· The next crucial step is to ensure that you have up to date financial statements. This is not just your annual accounts. Most people now have accounting software that will generate monthly profit and loss accounts as well as balance sheets and other up to the minute information. If you can’t access these, speak to your accountant for help. With this information you will be able to see clearly whether you are profitable and, most importantly at this stage, solvent.
· Review all of the Company’s overheads. You will need to stop anything you do not absolutely need.
· Consider how you could increase your turnover. Can you increase your prices? Most people haven’t increased their prices for years and just keep charging what they have always charged. You don’t need to make an announcement, just increase them at the next opportunity.
If you believe the Company is either insolvent or heading towards insolvency, then you should also implement the following steps immediately.
If the Company fails then creditors will always suggest that the directors knew, or should have known, that the Company was insolvent. If it can be proved that this was the case, then they could be personally liable for the losses incurred. More details can be found on the page ‘Am I personally liable?’.
The most useful step right now will be to book a free 20 minute initial call to discuss your situation. We are happy to talk to you and here to help.
Find out more about our insolvency, liquidation or recovery service. Learn how we can support you with clear, straightforward and empathetic guidance and support.