In its simplest form, insolvency refers to a situation in which a company, organisation, retailer, or other business entity can no longer pay its debt in a timely manner, and generally means that the firm’s liabilities exceed its assets.
Understanding the Causes of Insolvency
In today’s unpredictable financial climate, numerous companies are struggling with the looming threat of bankruptcy and liquidation, but it’s important to understand exactly why. According to a recent commercial survey, the top reasons for insolvency are shown below:
- Poor cash management
- Significant reduction in revenues
- Unprecedented increase in operating expenses or overhead
- Bloated interest expenditures from past loans
- Product or service cannibalisation due to inept strategic management
- Increasing global and local competition
- Inability to adapt to changing technology
- Diminishing customer and employee retention rates
Can I Revitalise My Bottom Line?
The answer to this question is largely dependent on your foresight and timeliness, namely with regard to the following early indicators of insolvency based on these questions:
- Are you struggling with arrears of PAYE or value-added tax?
- Are your credit lines and bank facilities fully utilised?
- Are your supplier accounts frozen or defunct?
- Are you facing litigation for overdue payments?
- Is the gap between your liabilities and assets increasing?
As soon as you notice any of these warning signs, it’s in your best interests to partner with a reputable local business recovery specialist such as Michael Chamberlain.
What Can I Expect From My Recovery Expert?
To put it plainly, insolvency consultants specialise in facilitating a wide range of concise actions to extend your financial runway and save your business from bankruptcy. With this notion in mind, your recovery expert will immediately begin evaluating your assets, liabilities, cash flow, revenue stream, supplier relations, creditor accounts, and all other relevant aspects of your business in an effort to ascertain a viable course of action.
After conducting an exhaustive assessment of your operations and balance sheet, your insolvency consultant will then outline the most viable options to re-establish solvency, which can include the following:
- An equity investment from a willing financier.
- Restructuring your debt accounts and lowering interest rate payments.
- Facilitate informal creditor agreements and institute more amicable repayment schedules.
- Selling certain assets or liquidating an unprofitable department.
- Entering into a Company Voluntary Arrangement (CVA).
- Pre-pack administration or liquidation with a restart.
As you might imagine, it’s far more prudent to create a tight-knit relationship with a renowned business recovery specialist than to blindly file for bankruptcy, which is why so many struggling proprietors are beginning to turn to these insolvency experts in today’s day and age.
With a dextrous, highly-skilled consultant by your side, you’ll be able to maximise your chances of saving your business and regaining solvency, but you’ll have to act quickly in order increase the probability of success.