Insolvency – Surviving a Crisis

Can your business survive a crisis? Do you know how to recognise the warning signs?

These may seem easy and straight forward questions and you may answer yes with out much thought, but the failure of management to focus on theses issues causes many business to enter into insolvency proceedings. The simple fact is that if management have the right information available and act upon it in a timely fashion then many business’s could be saved.

You might think it may never happen to you – but it could- other peoples failures impact upon even the most long standing of businesses. Understandably the majority of all your time may be directed towards establishing new business contacts or managing at the sharp end etc – this is particularly true for owner managed and family businesses- but how much of your time is honestly devoted to keeping an eye on existing customers or even suppliers of vital stocks or services. It is all too easy to consider that a long standing customer or supplier will always be there – but will they?

So what do you do? The first step is recognising the warning signs and secondly you must immediately do something about it. This will allow you the maximum time to take the steps to mitigate the impact upon your business.

Recognising the warning signs

  • Customer Retention problems
  • Late customer payments or payments on account?
  • Are you offered post-dated cheques?
  • Do customers dispute invoices unnecessarily?
  • Are customers requesting or allowed unauthorisation credit limits?
  • Are salesmen extending further credit on overdue accounts?
  • Are suppliers reducing your credit period?
  • Do you suffer a high fixed cost base?
  • Deteriorating relationship with business bankers or creditors

It is generally considered there are four main causes of company failure. Bad debts, lack of working capital, failure of management and the loss of business market.

Bad debts an efficient credit controller is invaluable and can mean the success or failure of a business. The key is to be flexible at all times but work within acceptable boundaries to reduce your’ exposure.
Loss of market difficult to predict as it is usual for it be a gradual decline rather than an overnight occurrence. The production of internal management accounts together with budgetary information will be invaluable if used and interpreted correctly.
Lack of working capital This is difficult to over come especially with small business’s, however if all the other angles of business failure are adequately tackled then the business should be well prepared and an attractive proposition to investors and lenders.

If you are honest with yourself and you are feeling a little uncomfortable having read the above then it is time to seek properly regulated professional advice. We at Muras Baker Jones assure you of total confidentiality at all times and offer you a NO OBLIGATION FREE initial meeting.


For more information or to arrange your initial FREE consultation please telephone Mark Botwood on (01902) 393007.