Times are tough, and even with the best planning, a company can still get itself into financial trouble. Once there, it can be a slippery slope into insolvency, and even closure if decisive action isn’t taken to tackle the problem. So as a company director, what steps can you take to ensure financial problems don’t spiral out of control and lead to your company closing?
Review Your Outgoings
When money’s tight, it’s time to reconsider which of your company’s outgoings are essential, and which you can do without. A look at your balance sheet can quickly reveal which of your expenses are costing the most.
You may have to reduce your sales and marketing budget, especially if it doesn’t provide a sizable return on investment. If your office or premises are an expensive drain on your company’s finances, you might need to consider downsizing to a more affordable alternative.
These little amendments may help save some funds if you’ve dipped into the red. However, if the issues are more substantial, further action may be required.
Get Help if You Can’t Repay Your Debts
If the company’s debts are growing and at a point where you can’t repay them with its current assets, it’s time to consider getting help. Failing to pay the debts when they fall due can lead to creditors taking more drastic action to recover what you owe them.
This action could be a statutory demand, or a County Court Judgement (CCJ), which would set a date for the debt to be repaid. If the debt remains unpaid, they can send in debt collectors, and in some circumstances, bailiffs.
Should this happen, and your company’s debts push it into insolvency where its liabilities outweigh its assets, you should seek help from a licensed insolvency practitioner. Depending on your circumstances, you may be able to repay the debt in affordable instalments.
Close Voluntarily Before Being Wound Up
Once threats of legal action become threats of winding-up, closing the company might be your best option. In the UK, this is done via a Creditors Voluntary Liquidation (CVL). This process works by closing the company, making employees redundant and realising the remaining assets for distribution to the creditors. Closing voluntarily is more organised and preferable to having the company wound up via a compulsory liquidation, in which you’ll have substantially less control. Once the company is closed, and if your liquidator finds you’ve acted lawfully, you can start a new limited company free from the old one’s debts.
Any sign of financial trouble should be taken seriously. Ignoring it can easily lead to further creditor action, and even the end of your company if it escalates far enough. Reviewing your outgoings can help indicate what’s costing the most and if it’s having a detrimental effect on your company. If unpayable debts are piling up, even if your creditors haven’t taken further action, you should seek help from a licensed insolvency practitioner who can offer a range of solutions to suit your company’s needs. These could include paying your debt in monthly instalments or restructuring, and if necessary, closing the company, allowing you to start afresh.