If your business is struggling you are probably wondering what you should be doing now.
Here are four things that will help your situation…
1. Get advice from an independent expert
As soon as you start to experience financial difficulties, speak to an independent, experienced professional.
You should be offered a free initial consultation.
In that meeting, you should mention all the details of your situation. If you withhold key information you won’t get the best possible advice.
2. Don’t make any large payments until you have spoken to an expert
We often speak to directors who have just injected new funds into their struggling business only to see that the money has quickly disappeared. A far better strategy would have been to Liquidate the struggling company and put those funds into a new company, free from the historic debts. There are plenty of lenders we know who are keen to lend to business re-starts.
Sometimes, fearing their company is going bust, directors want to give themselves a large pay-out in consideration of the money they have put into the business. Or perhaps they may feel that one creditor is more deserving of payment than another. Such payments would put the director in breach of the Insolvency legislation and could possibly result in a fine and/or imprisonment.
3. Know when it is time for you to stop trading
If you know your business is unlikely to survive, or is already Insolvent, you should not continue to trade or take on more debt. Optimism is a good thing, but you must be realistic.
Insolvency Practitioners are legally obliged to report to the Department for Business, Innovation and Skills on the conduct of the directors in the final stages of their business.
Potential consequences of wrongful trading can be serious. Directors could:
- Be disqualified
- Face personal liability
- Have to supplement the assets that remain of the insolvent company to pay back creditors
4. Collect your debts
Some directors are so busy ‘fire-fighting’ that they don’t collect money that is owed to the business.
In these tough times, customers will often hold back from paying until they are chased for payments. It’s not that they won’t pay you; they are just taking advantage of your (unwittingly) generous payment terms.