What To Do If Your Business Is In Financial Trouble

First, take a hard, honest look at the situation. The earlier you recognize the threat of business bankruptcy / insolvency, the stronger your position when it comes to putting things right – and identifying the causes of the problems gives you a starting point for solving them. So make sure you know exactly what’s going on:

  • Check your bank balance regularly and frequently.
  • Update your actual cash in/cash out balance weekly, or more often if things change quickly.
  • Keep an accurate cashflow forecast for the next few months.

Decide whether to cease trading

Having looked closely at the facts, the directors need to decide whether there is a realistic chance of saving the business. Administration and other business turnaround options should be discussed, but if the business is irrevocably insolvent and continues to incur debt, the directors may be liable for wrongful trading. To continue trading, directors need to be sure there’s a reasonable chance of avoiding liquidation and minimising any loss to creditors. Directors often need professional advice to decide whether business bankruptcy can be avoided.

It’s essential to keep on top of the situation. Directors should:

  • Meet regularly to discuss the current situation
  • Keep detailed records of their discussions at meetings
  • Regularly review the decision to keep trading

Avoid business bankruptcy by communicating with your bank

If your forecast shows that there’s a risk of exceeding your agreed overdraft or going into the red, talk to your bank immediately. Demonstrating that you are planning ahead is much more likely to gain support from the bank than leaving things until there is a crisis.

Identify causes and solutions

Fact finding makes it possible to identify the problem areas and consider possible solutions. If your cashflow problems are the result of insufficient sales, for example, you might look at ways of increasing your trade:

  • Review your sales and marketing
  • Look at ways to sell more to existing customers
  • Consider new markets

If cashflow is problematic because of delays in being paid, you might consider solutions that could reduce those delays:

  • Concentrate on winning business that generates cash more quickly
  • Make sure invoices are sent out on time and chase overdue payments
  • Look into arrangements such as Factoring and Invoice Discounting
  • Think about reducing payment periods
  • Refuse repeat business from customers with a history of late payments

If it is unlikely that you can improve the situation by increasing sales or reducing payment delays, you will need to consider other methods of freeing up cash – for example, by selling assets, cutting staff and reducing costs and stock.

Get professional advice – for free

Whether you are facing business insolvency or have a viable business that needs help with cashflow problems – you can benefit from specialised expert advice.

Touch Financial is a commercial finance broker that provides quotes, information and advice to small business owners. We offer a free consultation to help you decide the best way forward for your business. We’ll take the time to understand what your business is about, then put you in touch with the most suitable lenders, insolvency practitioners or small business administration service for your needs.

Having the right expertise on board is key to turning your business around and getting back on track.

Avoid business bankruptcy – contact one of our experts now on 0845 388 9725.

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