While lockdown restrictions may have eased in the UK, the damage caused by the COVID-19 pandemic to the economy is still a clear and present danger to the health of many companies. Statistics show that turnover is atrocious, rated at about 20 percent less than what would typically be expected for the season, with footfall dropping 30 percent compared to the same period last year.
About one in ten companies report that they run a “moderate” risk of going belly up, with about 1% of companies reporting that the risk of going bust was “high.”
While this may sound bleak, the situation is not all doom and gloom. Statistics show that the number of actual insolvencies fell by about 23 percent in the second quarter of 2020 when compared with the first part of the year. Furthermore, the number of insolvencies that resulted in liquidation in England has also fallen from 41 to 37 per 10,000 active companies year over year.
In spite of this, insolvency is still a real and present threat to your business – and as a business owner, you need to take all necessary precautions to protect your company.
Measures You Can Take To Combat Insolvency
Update your cash flow forecasts diligently to account for your current financing needs.
Tighten credit control to protect yourself against accounts uncollectible. Don’t hesitate to collect any debts you can. If you already have accrued bad debt, try to use factoring to get rid of it.
Avoid personal guarantees. On the same note, also avoid joint and several liability. These can become something of a trap, leaving you liable for all of the collective debt in question.
Your spouse or civil partner should have a separate bank account from yours, just in case you go bankrupt. However, keep in mind that said bank account couldn’t be used as a safe haven for an insolvent company’s assets and that you should always seek legal help for any issues regarding bankruptcy (like this bankruptcy Maricopa County law firm), whether it is for filing or for advice on protecting your financial assets.
If you lack cash in hand but believe that things could get better in the future, contact your bank and try to secure funding.
If you even get a whiff of severe financial trouble ahead, immediately start thinking about restructuring your business. Consider selling non-essential assets, cutting costs, etc., to ensure that you don’t end up in excessive debt.
Another option to consider is paying your creditors before you accrue even more expenses and debt that could come back to bite you later down the line.
In that case, try restructuring your own debt. Uninsured creditors are likely to be less willing to negotiate in such situations, but convincing them not to push for liquidation can buy you precious time to save your company.
If you find yourself unable to satisfy your creditors, it is advisable to consult a professional , such as the insolvency practitioners in London HudsonWeir who can help you try to restore your business through various means.