As the country continues to struggle with the ongoing financial problems of the coronavirus pandemic, companies are finding themselves in financial trouble now, more so than ever. Once you get there, it can be a slippery slope down into a path of insolvency and liquidation. So, what can company directors do? What steps can be taken to ensure that your company has the best chance of survival?
Review all your outgoing and incoming expenditure
When things are right, it’s time to look at all of your essential incomings and outgoings and ask yourself what’s the best thing that you can do? A look through your balance sheet should give you an indication of where you can chop and a chance to save some pennies. You’ll be able to see which of your outgoings and necessary and there when you can make cutbacks.
Look at which costs don’t provide you with the best return on investment. Is your marketing doing its work? Is it worth the money you’re paying? Or is your office too big, maybe it’s time to embrace working from home and downsize to a more affordable alternative? The big one will be looking through your business processes and try to work out the areas which are the least efficient and need improvement.
Look for financial backing if you can’t repay your debts
If your debts are growing too much and at a point you can’t repay, but you still have a good business model, financial help might be the way to go. Failing to pay your debts when they fall due can often lead to creditors taking drastic action to try and recover what you owe them. They will often look to issue CCJs or statutory demands and can sometimes even ask bailiffs or debt collectors to try and receive their payment.
In circumstances like this, commercial finance or invoice finance can be a great way of pulling in extra cash when times are hard. There are also form repayment plans such as Company Voluntary Arrangements, which involves an insolvency practitioner setting up a plan for any creditors the company has to be paid in monthly instalments.
Close the company and start again
If your financial woes become too much, eventually one of your creditors may look to wind-up your company. To avoid this, you may look to liquidate the company yourself via a Creditors Voluntary Liquidation (CVL) and then simply start a new company again. This process can work by closing your company, with all assets remaining within the business being sold to repay as many creditors as possible. Once the company is close and the liquidator finds that you’ve acted lawfully, you can start a new limited company free of the debts of the previous one.
To sum up
Any signs of financial trouble have to be taken seriously and shouldn’t simply just be ignored. The more you bury your head in the sand the worse things will get. Reviewing the financial position of your company gives you the best chance of truly seeing how your business is working and what kind of action you should take. If you can clearly see that the business model within the business works, thankfully there are options you can take to improve things. However, if there’s no hope, you may be better off cutting your losses and closing the company down.
Infographic created by Clover Network, a retail POS system company
