Is my business insolvent and what to do if it is

There are two definitions in statute that set out what insolvency is.

The main one will be that the business can’t pay its debts as and when they fall due.

If this is the case, you have a duty to protect creditors and safeguard the assets of the business.

If you don’t, you could be held personally responsible for their loss.

The good news is that there are methods to help you avoid insolvency as well as avoiding any personally liability but you need to engage with a qualified professional and licensed insolvency practitioner such as Harrisons Business Rescue to help you formulate a plan to help the business survive.

Your business may be unable to pay its debts for a number of reasons that all need to be considered and either resolved or a plan put in place to help manage the problem.

These will include

    it not being profitable

    you spending more than it makes

    your customers not paying you when they should

    lack of funding in the business to cover seasonal issues, bad times, asset purchase etc

The first step looks at your business and make a plan and look at the cash available and how to improve it.

A fresh pair of eyes will help highlight areas that you may not see due to you being involved in the business all day, every day.

Harrisons Business Rescue can help you with this and help make a proper assessment of areas where savings can be made, cash collections improved, overall funding improved etc

Simple improvement could be collecting the money due to you in line with the contract with your customers or using one of the current schemes to delay payment to HMRC.

The money owed to you is your money and you should collect it in accordance with the terms agreed with the customer.

It can be a fine balance between collecting what is due and keeping a long-term customer who may be difficult to replace.

It may be that you don’t have the skills or time to contact them all and agree payment, completion of defects if there are any, arrange payment terms if they are struggling etc

Other areas may be reducing some items of costs such as marketing, research and development, external sponsorship, etc

By approaching Harrisons Business Rescue, we can help highlight the issues and introduce experts in the field who we have worked with successfully before to achieve the right result.

If your business is insolvent it may you have a duty to protect creditors and to not make their position any worse.

You shouldn’t pay a creditor or group of them in preference to others.

By making a plan, you can identify what cash will be available to repay your creditors.

Some negotiation may be needed to ensure they still supply you if you are unable to pay then when the debt is due.

Particular creditors such as banks or HMRC may agree to delayed payment, even if its only for a few months or in some instances longer, which may be all that is needed for the business to survive.

Banks and HMRC will want to see that you have a plan for the business and to repay them on new agreed terms

If you are drawing more than the business can afford, look at where you can cut your costs, even if only temporarily, to help the business.

This could be a range of areas where small saving or changes, can have a big impact.

When looking at the issues in the business, Harrisons Business Rescue will also help you look at your finances to ensure that they are ok.

If there isn’t enough cash or funding in the business, it will struggle when times aren’t as good and may also be unable to grow as its unable to fund projects, asset purchases etc.

If you’re currently struggling with debts, then it’s best to look at other sources of funds, such as borrowing cash from banks, specialist finance houses or local or central Government, particularly in the current crisis.

Inward investment from third parties can also be an option.

The outbreak is having an impact on every business and without expert help, some won’t survive.

The Government has announced a range of measure to help businesses at this time with announcements on a regular basis of new packages of assistance.

Harrisons Business Rescue have covered the current ones here

Not all businesses will be able to access them but we can help you consider all options available to you, including Government support, and work with you to help both you and your business find a solution that works