Early Indicators of Insolvency

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Avoiding Insolvency

We understand how tough it is for businesses at the moment and we are all too familiar with companies who have left it too late and now face insolvency.  It is a stress that no one needs. 

Below are some early indicators of the typical issues facing Directors & Business Owners at the moment. If your business is experiencing one or more of these then please do get in touch for a confidential, no obligation chat. 

The common signs of business distress

Sales pipeline

Extended sales time

An increased lead time in the sales process puts a strain on turnover.

Increasing costs

Continually rising costs constrain cash flow and make forecasting difficult.

Reducing demand

Businesses continue to be affected by the cost of living crisis leading to reduced demand.

Losing clients / suppliers through closures

Challenging market conditions lead to increased business closures, affecting both supply and sales.

Cash flow

Increasing debt

An increasing debt burden leaves businesses operating month-to-month with fewer options for repayment.

HMRC tax arrears

A greater number of VAT, PAYE, NICs and other tax liabilities appear on the balance sheet.

Increased debtor days

Continual late payments constrain cash flow, affecting business operations.

Creditor disputes / Winding Up Petition

Inability to pay suppliers leads to creditor disputes, which may result in the issuing of a WUP.

Financing issues

Rising borrowing

As cash flow tightens, companies seek to increase their borrowing to cover costs.

Negative balance sheet

Liabilities increase leading to a negative balance sheet and reduced working capital.

Sale/refinancing assets

Businesses seek to sell or refinance their assets to cover rising costs and debt.

Late accounts

Financial distress leads to accounts being submitted late, with possible consequences for directors.

Staff / HR

Budgetary constraints vs growth

Expansion projects are put on hold through budgetary constrictions.

Communication breakdown

Management pressures lead to less communication with stakeholders.

Increased absenteeism

Staff become demotivated and experience personal financial pressures, leading to increased absences.

Loss of key staff

Pivotal staff members leave resulting in skills shortages and greater expense in new hiring and training.

Common business challenges

I can't pay all of my company debts

You may identify with one or all of these:

•  I have cash flow crisis
•  I’m struggling to pay creditors
•  I can’t pay business rates or rent

My company owes money to HMRC

You may identify with one or all of these:

•  I can’t pay what I owe to HMRC
•  I have a Winding Up Petition
•  I am subject to a CGA

I am facing a number of challenges

You may identify with one or all of these:

•  I’ve lost a large customer
•  I have suffered a bad debt
•  I have lost key employees

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