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Insolvency warning signs

Financial problems tend to be insidious.  Although it can happen, it is rare that directors or owners wake up one morning to find the financial disaster has suddenly struck.

The spectator sees more of the game

Indications that something is wrong are likely to be more obvious to others than they are to you.  Busy firefighting and juggling your budget it is understandable that you might fail to spot the warning signs.  Our traffic light system will help you to decide whether your financial problems are temporary or out of control.  If you are in any doubt please get in touch, invariably the earlier you contact us the more we can do to help.

The traffic light system

Green - go ahead but keep under review
iStock 16251684 green
  • You are not losing money and do not need any credit
  • You can't pay creditors in accordance with normal terms but they continue to provide credit and services subject to interest charges and late payment penalties
  • You can pay current tax but you have tax arrears.  You have agreed a schedule with the HM Revenue to pay off those arrears
  • You have to increase your overdraft facility to take a new loan in order to pay your creditors near enough on time

Amber - proceed with extreme caution
iStock 16251684 amber2
  • You can't pay creditors within agreed terms.  They have put you on stop but have agreed to give you longer to make proposals to pay
  • You can only get limited credit from new sources and you are using this to fend off your existing creditors
  • You can't accept new orders because you can't get raw materials or pay for the overtime required to fulfil them
  • Your bank has decided to claw back your overdraft facility and you are missing payments to non-essential creditors.  Your bank wants you to agree to an independent business review
  • Creditors are threatening legal action

Red - stop and seek professional advice immediately
 iStock 16251684 red
  • You are on stop with key suppliers, cannot raise working capital to fund your order book and turnover has dropped to below break even point
  • Your income will not meet your outgoings once interests and penalties are taken into account
  • County court claims and statutory demands regularly land on your doormat
  • You are having sleepless nights and are on medication to steady your nerves
  • You have received notice of a winding up petition

 

If action is taken early there is often a good chance of a successful business turnaround.  However, once decline has set in the chances of success become more remote and formal insolvency ends up being the only option.  

We see many business owners who have had their heads in the sand for months or even years.  We understand why! Facing up to the situation can be harsh, painful and involve difficult decisions.  But the sooner it is done the better outcome there is likely to be.  We help directors and business owners of SME and family run businesses throughout East Anglia and London who are in this situation all the time - our expertise and sympathetic approach means that you don't need to face financial problems alone.

For more information or to get in touch call us on freephone 0800 085 5070

 

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Chris McKay is good at communicating the difficult concepts of his profession into clear messages, and his open manner and speedy responses help to make a bad situation better.
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