Would your business pass the solvency test?

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The collapse of Carrillion rocked the business world.  We’re already witnessing the insolvency domino affect along the wider supply chain.  One thing is clear the warning signs were ignored.

Here’s a guide to insolvency to help Directors spot warning signs early:  business or  supplier.  

What does insolvency mean for Directors?

Insolvency, is complicated. However, in simple terms, it’s when a business is unable to pay debts that are due or liabilities exceed the assets. Under the Insolvency Acts 1986 and 2000 the onus is placed on the company Directors to put the interest of employees and creditors first – ahead the company. It becomes an emotionally charged time and stressful for all involved.

Warning signs a business is struggling

  • Books in arrears
  • Exhausted company overdraft
  • Borrowing from personal account to support business
  • Struggling to meet PAYE payments
  • Delaying paying suppliers
  • Receiving final demand payments
  • No funds available to pay VAT bill

Warning signs business is almost insolvent

  • Can’t pay your debts
  • Can’t pay your staff
  • No working capital
  • Receive a Court summons
  • Taxes overdue!
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Insolvency – Unsplash

Does insolvency signal the end?

Insolvency is not the end of the line for a business. There’s always possibilities. Insolvency can be an opportunity to look at options for recovery,  most importantly start the cash flowing again.

If your business is already showing any of the warning signs – act quickly. Don’t think of them as a temporary blip. Consult an expert ASAP to review the internal and external factors to find out why it could be happening and find solutions to save the business.

“There has been a 4.2 percent rise in company insolvencies in 2017 to 17,243, and a rise in quarterly insolvencies for Q4 2017 to 4,382. Mike Cherry, National Chairman – Federation of Small Businesses (FSB).

What can SMEs do to protect themselves?

Under the Insolvency Acts it’s your duty, as a Director, that you obtain regular updates on financial position of your company. Also remain aware of any potential insolvency risks. In all fairness, this is good advice. I strongly urge a company owner to engage with a business professional.  Experts help you comply with your duties, stay informed and ensure a healthy balance sheet.

How an accountancy expert helps avoids insolvency?

  • Writes a robust business plan
  • Forecasting and reporting
  • Secure essential cash flow
  • Set up systems for invoicing clients on time
  • Set up payroll to control PAYE
  • Secure line of credit to overcome business peaks and troughs
  • Put in place a workable plan to pay back any debts
  • Prioritise payments in line with Insolvency Act

At Murrison & Wilson we have a proven track record for keeping our clients’ balance sheets healthy and the cash flowing.

If you have spotted any of the warning signs? Talk to a business expert today and start reviewing your options – before it’s too late.

Please do get in touch by email, on social media or pick up the phone and call Simon on 0141 290 0262

Warm regards

Simon Murrison, CA

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