No-one ever started up a business with the aim of it failing, but unfortunately not all businesses survive long term. So how do you know if your business is just hitting a rough patch, or whether you are in more serious trouble and need to start looking at potential insolvency and liquidation?
There are a number of classic signs that a business is in trouble and if some, or all, of these resonate with you it might be time to get some specialist and professional advice about the real state of your books and what you should do next. Insolvency practitioners normally charge by the hour but Handpicked Accountants can put you in touch with licensed IPs who provide free, confidential consultations about the state of your business and can advise on the best way forward. Simply use our enquiry form and we can help https://www.handpickedaccountants.co.uk/contact
So what are some of the warning signs that your company is in trouble and may need to be liquidated?
Can You Pay Your Creditors?
Problems with cash flow affect nearly all businesses from time to time, however if difficulties paying your creditors becomes a pervasive issue then it could be a sign of bigger problems to come. Look out for concerns such as:
- Consistently paying creditors late, causing them to send you numerous final demand notices and constantly hassling you for payment.
- Suppliers refusing you new or extended credit or taking out trade insurance because of a previous lack of payment.
- Problems ordering new stock because of your debts and production/stock are falling behind as a result.
Has the Bank Turned Nasty?
If your bank seems to have lost faith in you as a reliable client then this can often be the first step on the slippery slope to liquidation. Warning signs can include:
- Are you at the limit of your overdraft and has the bank refused to extend it without your providing personal guarantees, as your business has been judged not to have sufficient assets to secure a new loan?
- Company cheques are bouncing and direct debits are not being honoured.
Are You On Good Terms With HMRC And Companies House?
HMRC can quickly turn into one of your worst nightmares if you are late in reporting or paying. Any issues could throw up an immediate red flag with them. Look out for:
- If you are not submitting your VAT, PAYE and Tax returns on time, you will be liable for penalties which only serve to make a bad situation worse.
- If PAYE is not paid by the 19th of the following month then this issues an alert to HMRC who will immediately start chasing for payment.
- Delays in submitting annual reports to Companies House will result in chasers and possible penalties
Do You Know Exactly What Is Going On With Your Company?
A huge warning sign for many businesses is not having access to reliable management information and thus not really being able to have a handle on exactly what state the business is actually in. Problems can arise from:
- Not having sufficient and suitable systems in place to provide vital information about the actual performance of the company. Information such as; sales forecasts, cash flow reports, debtors lists and bank reconciliations are vital for accurately keeping track of your exactly how much you owe and are owed are will be required if you need to consider insolvency or liquidation tactics.
- Not knowing exactly who owes you what and what you owe to others.
- Having insufficient information upon which directors and company management to base decisions.
- Not knowing exactly where the majority of your work and profit comes from and where in your business you gain your highest return on investment.
If you have answered yes to some, or all, of these issues then it could be a sign that your company is in trouble and may be facing liquidation. If so it is vital that you don’t bury your head in the sand but face the problem immediately. Contact a licenced insolvency practitioner or as a first step you could simply get an accountant to properly look over your books and tell you exactly what state the business is really in.
Handpicked Accountants will put you into contact with qualified, reputable and trustworthy accountants in your local area. We have built up relationships with our accountants over a number of years to ensure that they will provide only the very best service, that you know that you can trust. Simply click to find an accountant today.