How To Save Your Business From Debts
There are many small businesses in London facing financial crises who are seeking professional insolvency advice from London Insolvency Auditors. Although London is one of the economic capitals of the world, many businesses have felt the financial strain in the recent recession and things are not likely to get any better for a couple of years to come.
What is insolvency?
With the current economic recession, small business owners are worried about their company debts and the liabilities that the directors might be left with in the event of liquidation. With this in mind, insolvency is a growing concern for the UK business community. Insolvency occurs when a company cannot cover its debts. Where bankruptcy is a term used for individuals, insolvency is a term used for businesses. The two main types of insolvency are balance sheet insolvency and cash flow insolvency. When a company’s liabilities exceed their assets this is known as balance sheet insolvency, in other words, when the cash flowing out of a business is greater than the cash flowing into the business. Cash flow insolvency is a company’s inability to pay debts as they fall due
Causes of Insolvency
The current economic climate has proved too much for some businesses. There are a number of causes of insolvency such as loss of market, management failure in some capacity, unsustainable debt, and a businesses’ inability to pay their tax bill. Insolvency is most often caused by a businesses’ incapacity to handle company finances correctly. These are the more common reasons why businesses become insolvent, but there are many others.
How can you solve this problem?
Whatever business you are in, if you are facing insolvency you have to make some very important decisions, first of all do you want to continue on with the business? Second, do you just want to call it a day and walk away but need to minimize your personal liabilities?. To rescue your business, you will need to not only pay back creditors you failed to pay in the past, but also change your practices so that this is not a situation your company has to endure ever again. This process is usually spread out over a period of between two and five years. The guidance of a good London insolvency auditor is critical.
Look at all of your options
If insolvency seems inevitable, there are more options than just simply closing the business. Remember that closing your business will also incur costs. As the director, you should weigh up your other options. For example, it may be better for you to do a Company Voluntary Arrangement (CVA) or a Pre Pack Administration. A CVA usually involves decreasing the size of the debt repayments and writing off some of the company’s debt. A Pre Pack Administration is when a brand new company can buy the assets and not worry about the debts of the previous company. These may be better options for the company, but always consult an experienced and professional London Insolvency Auditor.
What you should do
It is of paramount importance that a business facing insolvency seeks the very best professional advice that is available. You need to weigh up your options at the earliest available time. If your business is being burdened with business debts and you cannot see a way out and need advice and guidance relating to insolvency problems, you can get the best advice from a great Insolvency Auditor. This could be the most important decision you make for your business, so be sure to employ the best advice that the industry has to offer.