The early bird catches the worm!

At PCR, one of the most important messages we try to project to business owners and company directors is to seek professional and regulated advice early in the event of any cashflow issues. Unfortunately, many businesses choose to ignore such advice until it’s too late. We’ve witnessed first-hand countless companies approaching us at a late stage hoping for a miraculous solution to save them from potential disaster. However, the longer you leave it to seek professional advice, the more difficult it is to achieve a successful turnaround.

You MUST seek professional and regulated advice early if you are worried about your company’s finances!

So how do you spot potential problems before it’s too late? This is the key question which could ultimately determine whether your business will be able to survive or not. Although there are many potential danger signs to an organisation such as the loss of major contracts, overtrading with a lack of funds and profit margin and not having enough money to pay wages to a high staff turnover, there are significant other factors which must not be ignored.

An increase in borrowing
Your business could’ve been performing well for several years but a sudden change in the market could throw a spanner in the works. Suddenly, poor sales have had a significant impact on your business. It is almost human nature to look for an immediate cash injection in the form of borrowing. However, if you’re consistently reaching the limit of your company overdraft, or are unable to borrow money, you need to closely review your situation. Once suppliers start refusing you credit this could impact on your ability to continue to trade. If your company regularly borrows money to pay its creditors and staff wages for example, it is obvious something is not quite right. To add ‘salt in to the wound’ these suppliers could cause further damage down the line by issuing a statutory demand, in the event of non-payment.

Late Payments to creditors
Every company may have failed to keep on top of payments from time to time, but if this is a continuously recurring theme, then you know something is not quite right. Not only could these late payments affect your company’s credit score, but the underlying feeling is that you could well not be operating within your limits. Such a red flag would also alert the bank to look in to your company’s financial dealings and overall financial situation. You are far more likely to go down the road of insolvency if this is a common predicament your company finds itself in.

A winding up petition has been issued
If your creditors are convinced that you are no longer able to pay your company debts, then they can apply to the courts for a winding up petition. This is usually a last resort and is often known as the ‘nuclear’ option. The winding up petition is also the most serious piece of action that can be taken against your company and is usually proceeded by a statutory demand. Examples of this being implemented could be if payments have failed or cheques have bounced back on a regular basis. The creditors also only need to be owed £750 for them to submit the petition to the courts. You know you are in trouble if the courts issue you with one of these.

Directors are not paid
If a director’s wages are affected and, effectively stopped – even for the good of the company assets, this is also another serious cause for concern. This could of course potentially lead to the depletion of personal savings and have an impact on personal life as well as the business.
It is imperative that company directors always act in the best interests of creditors, so if a director’s pay is affected then there are serious implications that insolvency is not far off.

What to do if you are worried
If any of the above applies to your business, you should look to act as soon as possible to give your business the best chance of survival.

At PCR, we provide regulated advice in assisting company directors and business owners in making informed choices allowing you to work around the pressures that so many businesses are facing in the current climate.

For help on any insolvency procedures in general, please contact us on 0208 841 5252 to arrange a FREE initial consultation with one of our Insolvency Practitioners. Alternatively, you can contact us on our Priority Contact Form, where we will look to get back to you as soon as possible.

Ahmed Ali

Marketing & Practice Development Executive 


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