Business insolvencies are on the rise again.
According to the latest figures from the Insolvency Service, the number of business insolvencies registered during the first quarter of 2012 was 4.3 higher than during the same quarter in the previous year.
With news that the country has returned to technical recession, there is concern that this figure could rise further.
If your business is in financial difficulty and struggling to meet its debt obligations, it is important that you tackle the problem head on. All too frequently business owners try to ignore the debt, hoping that they will be able to deal with it at a later date. In reality, by ignoring the problem you will only exacerbate it.
Your first step should be to determine exactly how much you owe, and to whom you owe it. Make a list of all your outstanding obligations, and work out exactly how much you can afford to pay each month.
You should then approach you creditors directly, and try to negotiate a new repayment plan. This might involve paying less each month over a longer period, enabling you to get a tighter hold on your finances. Don’t presume that your creditors will necessarily turn you down. Lenders will often be happy to negotiate – particularly if the alternative is likely to be a write-off of part or all part of the loan.
It is also important to consider ways in which you can ease your cashflow situation. Small businesses are often remarkably lax when it comes to raising and chasing invoices, and this can have a disastrous impact on your ability to pay your debt obligations. It is imperative that you invoice promptly, and that you chase late payment. Good credit management practices should be built into the day-to-day life of your business. You should also consider credit checking your customers and clients before extending credit.
What about insolvency?
If your firm remains unable to meet its obligations, you should seek advice from your accountant as a matter of urgency. They will be able outline the options for your business. You may, for example, be able to draw up a Company Voluntary Arrangement (CVA), under which you come to a formal agreement with your creditors on a new timetable for repayment. CVAs can only be drawn up with the assistance of a registered insolvency practitioner.
If you cannot come to an agreement with your creditors, liquidation is likely to be the next step. Liquidation can be proposed by either the business or its creditors. It is vital that you seek independent advice if you are considering liquidation, or if you have received an order for your company to be wound up.
Where can I get advice?
The sooner you seek advice, the more effectively you will be able to deal with your debt problems. Your accountant should be your first port of call. They will be able to help you understand your options.
There is also a range of independent organisations that may be able to advise you. Of these Business Debtline is amongst the most popular, providing debt advice to self-employed people living in England, Wales, and Scotland. You can also find more information on Business Link. Finally, you should also consider approaching your local Citizens Advice Bureau for free help.