Insolvency is when your income as a business is not enough to pay your debts – this is a simplistic view of insolvency as there are many other issues you will be facing, such as pressure from your bank, HMRC, creditors and debtor and you now longer want to answer the phone or open any post because of what you may find.
There are some important factors to think about such as keeping your exposure to a minimum and to try to limit the damage to the business where possible. First and foremost you need to look at all of your debtors and calculate how much money you are owed.
You could look at invoice factoring or discounting schemes that allow you to access the money you are owed now to pay off your debts to avoid insolvency. It works by selling your invoices to a lender at a discounted rate and then you receive at least three quarters of the invoice, most of the time on the same day. Then once the invoice has been paid, you receive the balance of the invoice with the charges of the service taken off.
You should decide whether you want to use factoring or discounting – the only difference is invoicing. In factoring, the company invoices your customers themselves and therefore, it is obvious that you trying to raise cash flow.
This could turn things around for you for long enough to start to put more effective processes and practices in place such as good credit control processes so you ensure that you collect your outstanding invoices in a timely manner.
However, there is the real possibility that your business is not recoverable and that it is insolvent. In these circumstances, you may consider outside investment or funding or a Company Voluntary Arrangement, also known as a CVA. You should try and avoid one of your creditors getting a winding up order on your business that will force you into compulsory liquidation. They can do this where you owe them over £750.
You do have options when your business is insolvent, so explore your options.
If you would like to know more about insolvency and how you can manage the process and your business, please call us now on 020 7490 5861 to discuss your options with our experienced team. If you would prefer, you can get in touch by emailing us on firstname.lastname@example.org and we’ll be in touch soon.