Reducing the risk of insolvency and staying on solid ground

Company Insolvency     |     December 20, 2016

At the end of the day, your goals in business are pretty similar to everyone else’s. Like all business leaders, you want your organisation to keep the money flowing.

Steady cash flow is crucial to a healthy business. If you don’t bring in enough cash to pay your debts consistently, every single month, some aspect of your operations is guaranteed to suffer. You might have trouble purchasing materials, procuring essential services or paying wages to the people who staff your company every day. None of these outcomes are acceptable. Your job is to stay solvent.

This means paying attention to the warning signs of insolvency and being ready to respond when things go wrong. If you’re smart and proactive, you can keep your business out of trouble.

Looking for signs of insolvency

If you want to avoid a situation where your business becomes insolvent, the key is to be proactive, watching your finances carefully and looking out for preliminary signs of money problems.

According to Law Donut, there are a few tell-tale signs to watch for in particular. For example, if your marketplace is shrinking and there are fewer customers around to buy your product, there’s a good chance your bottom line will suffer. Similarly, if a competitor is starting to siphon off your business, that’s a red flag.

There are ways you can avoid succumbing to these problems. For example, responding to new competition by developing a better product or putting out a more aggressive marketing campaign can be a tremendous step. Adapting to new technology and staying at the front of the learning curve is also important. If you’re dealing with a more drastic situation, you also may want to consider more large-scale changes such as restructuring your business. It depends on how worried you are that the insolvency issue might worsen.

Evaluating your options in a tough spot

If you’re looking at more than just warning signs, and it’s clear that you’ve got an actual insolvency situation on your hands, it might be wise to look at serious actions you can take to respond to the situation and get your finances back in order.

According to the Small Business and Family Enterprise Ombudsman, you have a few different options in that regard. One is liquidation – it might be time to wind up your business and have a liquidator come in to start selling off assets. Alternatively, you might opt for voluntary administration, in which an outside administrator is appointed to take control of your business, or receivership, which involves a secured creditor handling debts for you.

None of the above is a choice to be taken lightly. When you take decisive action to restructure your business because of a solvency issue, it’s sure to have a major impact on the long-term health of your business. It might be wise to speak with the professionals before doing anything rash.

Feel free to get in touch!

If you’ve never dealt with a corporate insolvency issue before, it can be daunting. You’re sure to have a lot of questions about the process. Fortunately, at Corporate Lifeline, we have answers. If it’s time to admit that your business has a problem and get serious about fixing it, talk to us. We can deliver the insight you need.

Our team of financial experts is based in Sydney, but we have staff located all over Australia. No matter where you are or what you’re going through, we’ll make an effort to work with you and help figure out your situation. Just get in touch.