So how do you avoid becoming another insolvency statistic and instead become a last-minute success story?
It is important to seek advice or to start making some changes within your business before problems get out of control and insolvency becomes inevitable.
Here are a few tips that could make all the difference.
1. Accelerate your debt recovery to avert insolvency
If you’re owed substantial amounts by your customers, you need to make sure they pay quickly. Many businesses allow debts to go unpaid for far too long, damaging their cash flow and jeopardising their viability. What’s more, if you’re lax about enforcing payment deadlines you increase the risk of your customers going into insolvency, meaning you won’t get paid in full – or potentially at all. If customers miss the due date, remind them immediately. If reminders do not produce payment, consider involving a debt collection company to recover what you’re owed.
2. Reduce your spending
Many businesses run into problems with profitability and cash flow problems which can lead to insolvency, not because they’re turning over too little, but because they’re spending too much. There are numerous ways you can reduce your monthly outgoings – from controlling petty cash more carefully through to consolidating your debts or, in the worst case scenario, laying off staff or downsizing premises. However, where a creditor is pressing you for payment and you don’t have the cash on hand, you will need to think fast and act in a way that won’t compromise your ability to diversify and grow.
3. Change your terms of business
Overhauling your terms of business so you get paid more quickly to avoid insolvency can transform your cash flow. One of the easiest ways to accelerate payment is to offer financial incentives for fast payers. If most of your customers are paying later than 30 days and your cash flow is looking shaky, consider offering a discount for advance payment or payment within a few days. Of course, it’s essential that any discount represents a good deal for yourself as well as our customers, or you’ll simply be swapping one problem for another.
4. Focus on your most profitable customers
All customers are not equal: some are easy to deal with whilst others are a nightmare, and some will pay on time, every time, whilst others will rarely respond until the third reminder. If you have customers that are taking up more than their fair share of your time, consider ending the relationship once you have taken on some more profitable business. By focusing on customers who generate significant profit, you can avoid insolvency and revolutionise your cash flow as well as transforming your company’s prospects. Best of all, if you can grow existing accounts rather than prospecting for new customers, you can save a fortune in sales and marketing expenses.
5. Take out a loan to pay your most pressing creditors
Too much debt can be disastrous and lead to possible insolvency for a company. So can too little. If your cash flow is compromised, a loan can get things back on track until the business climate improves. Cashsolv offers a range of options, including emergency business loans (with cash inside your account in under 24 hours) and asset-based finance, whereby you borrow against the value of your plant, premises or equipment. Equally, invoice factoring and discounting could revolutionise the way you do business. These finance options enable you to borrow up to 85% of the value of your invoices the moment you issue them, with repayment being made when your customers pay. With invoice discounting, you retain control of your own debtor ledger, whilst with factoring our highly experienced credit control professionals with deal with your customers and ensure rapid payment to minimise interest charges.
As you can see, insolvency isn’t inevitable even in the most challenging circumstances, and Cashsolv has a range of finance options to keep you in business. However, if the worst comes to the worst our insolvency services can find the best option for you, with expert advice on Company Voluntary Arrangements, administration, receivership and liquidation.