01 Jan What is insolvency? How Does One Recover from It?
If your business is on the brink of insolvency, the following steps might help you avoid that. The real question is, will your business turn around any time sooner? Business debt, bankruptcy, and insolvency are more or less the same things, so this article will touch upon and provide recovery solutions for all these. Let’s find out what is insolvency and how to avoid it in the long run?
Before we move any further, we need to comprehend the definition of insolvency. What is insolvency and how does it impact businesses? Insolvency is a state for a business or company in which they’re unable to pay debts. The situation might occur for multiple businesses in COVID times due to obvious reasons.
Lo and Behold! There’s hope for your business. Even if your business has been badly affected by cash flow issues, your inability to pay taxes, there’s still hope. Make sure you’re understanding the problem completely before going forward. Count on these four strategies to help out any business fix their bad cashflow:
1- Concentrate on your Good Customers Only
There are two categories of customers. The category number one puts you in a lot of trouble and at the end of the day delays payment for the longest period of the time. These customers will end up ruining your business. Stay away from them.
The category number two consists of people who’re reliable. These customers love your products/services and you’ve won their hearts over a period of time. Make sure you’re on good terms with these customers. They’ll end up making no fuss out of anything and get more sales delivered at your end too. Remember, you need to lessen your sales and marketing investments and focus more on cash flow/ sales.
2- Count on your Funding Options
Most of the new businesses don’t have enough capital to grow their business. Although their capital reciprocates the loans which is equal to zero, which is a good thing. You must take risks.
In this case, a big risk would be to take loans from the bank. No matter even if you’re not able to pay the loans on time, you’re still investing in capital. Plus you can always count on the grants offered by the UK government to get all of it sorted.
3- Work Out your Outstanding Debts
Many companies avoid paying their debts for the longest period of time. That increases the amount in their accounts receivable. This might make your insolvency issues even worst. The longer you take to pay your debts, the more risk your company will be at. Talk about the creditor having the authority to liquidate your company.
It’s always a good idea to pay all your debts on time. If it’s really difficult for you, make sure you reach out a debt collection company to recover debts. You can further offer an early payment discount to the company for the future.
4- Cut your Costs
You’re probably spending too much money on some of your operations that you must not. Make sure you’re reducing your spending. Just focus on your core activities and cut down your marketing spend. That might seem a bit hard, but once you’re done with it you’ll see a lot of profit coming in.
Still not sure about how to go about it, or your problems are more complex. How about you get our accountants on a quick call. Our expert accountants have been pulling out many businesses from the worst debts and insolvency scenarios. Talk to our experts today!