Are you worried about the financial stability of your company? If you’re not sure whether or not your business is insolvent, there are a few ways to find out. In this blog post, we’ll discuss some of the most common signs that your company may be in trouble and what to do if you think your business might be insolvent. Here are some Cash Flow Indicators.
Cash Flow Indicators
Factors indicating the availability or lack of cash become important. A short-term cash-flow problem must be distinguished from insolvent companies.
1. Inability to obtain equity or loan capital.
If your company is unable to obtain equity or has insufficient working capital, this may be a sign that the investors don’t believe your company is financially viable. If you have tried to obtain equity or other forms of financing and are unable to do so, this may also be a sign that investors don’t see any value in your company.
If the company directors have trouble raising finance, it’s important to determine why that is. The underlying cause could be something as simple as your company is too small to be of interest to investors, or it could be that your company is experiencing financial issues. If you believe the latter to be true, you’ll need to work to correct those problems as quickly as possible.
2. Issuing post-dated cheques or having cheques returned.
If you frequently issue post-dated cheques and have them returned, this may be a sign that your company is unable to cover the cheques when they are issued.
One way to determine if your company is in financial trouble is to see if you are unable to pay your suppliers and vendors on time.
3. Payments are made in rounded sums and for the smallest amount possible.
If you are making payments to creditors in rounded sums and for the smallest amount possible, this may be a sign that you can’t afford to pay the full amount of each payment. Essentially, you may be making partial payments because you have insufficient cash to pay the full amount. If you are unable to pay your creditors on time, you may have to close your business.
4. Tax remittances are past due.
If the company has tax remittances that are past due, this may be a sign that you are short on funds. Directors should be aware of the company’s financial position and should take steps to rectify the situation if it appears the company might be insolvent. If you don’t rectify the situation quickly, the taxation office may seize the company assets, garnishee the company bank account and/or send you a Director Penalty Notice creating a personal liability of the company debt. If you are unable to pay your taxes in full, you should contact the taxation office as soon as possible.
You may be able to negotiate a payment plan. If your company is unable to pay its taxes, this may be a sign of company insolvency. If you believe your business may be in financial trouble, you should take steps to address the issue as soon as possible. Part of resolving the problem may involve consulting your accountant or a small business restructuring practitioner.
Financial Statement Indicators
Financial statements should provide enough information for a company owner to assess the likelihood of insolvency. A lack of financial information is not always indicative of insolvency, but it is a common symptom.
5. Continued losses and a lack of working capital.
If your company is experiencing continued losses and a lack of working capital, this may be a sign that your company is insolvent. If your company is losing money and you are not able to rectify the situation, you may need to close the business.
If your company is experiencing a large amount of overhead and a small amount of income, it’s possible that the company may not be able to stay afloat. It’s important to try to correct this situation as soon as possible. If you are unable to turn your business around, you may need to close it.
6. A lack of up-to-date and accurate financial status.
One way to determine if your company is insolvent is to check its financial statements. If the statements are not up-to-date or accurate, this may be a sign that your company is in financial trouble. Additionally, if you see any red flags on company’s financial transactions, such as decreasing sales or revenue, increased expenses, net losses, or a reduction in company assets, this may also be a sign of insolvent company. If you believe your business may be in financial trouble, you should take steps to address the issue as soon as possible.
Creditor Relationship Indicators
The solvency of a company is frequently dependent on the support of other stakeholders such as creditors, employees, and the bank. The state of a company’s relationship with other key stakeholders is an indicator of its financial health.
7. You have a bad relationship with your bank.
The bank is often the company’s main source of new capital, so if the bank is not willing to lend you money, this may be a sign that your company is insolvent. If you have a bad relationship with your bank, this may also be a sign that your company is insolvent. If your bank is constantly asking for more collateral or if they are threatening to close your account, this may be a sign that they don’t believe you will be able to repay your debts.
8. COD trading or payment in advance is required by suppliers.
If your suppliers are requiring you to pay in advance or COD (cash on delivery), this may be a sign that they don’t believe you will be able to pay your debts. If your company is unable to obtain the supplies it needs to operate, this may eventually lead to the closure of your business.
9. Creditors may issue demands or initiate legal action.
If your creditors are constantly sending you demands for payment or if they have initiated legal action against you, this may be a sign that they believe your company is insolvent. If you receive a series of demands from different solicitors, this may also be a sign that your company is insolvent. If you are unable to resolve the issue with your creditors, you will likely have to close your business.
Schedule a Consultation
If you believe your company is insolvent, you should take steps to address the issue as soon as possible. The first step is to consult with your accountant or a small business restructuring practitioner. They will be able to assess your financial situation and advise you on the best course of action. If your company is insolvent, they may recommend that you appoint a small business restructuring practitioner or appoint a liquidator over the company.
If you are unsure whether your company is insolvent, it is always best to consult with a professional. At Small Business Restructuring Specialists, we are experienced in assisting small businesses in financial distress. We will work with you to assess your financial situation and advise you on the best course of action. Click here to schedule a free consultation.
