One of the earliest signs of a potentially insolvent company (i.e. one that cannot pay its debts when they are due) is when a company is struggling to pay its staff their wages.
If you’re a business owner facing this dilemma, it is important that you take the right next steps to deal with the situation properly and legally.
Employees expect to be paid on time (understandably). They have their own bills that need to be paid on time. So, if they do not get their wage on time, they will often be quick to look into their options of redress.
If you are a business owner and struggling to pay your staff what they are owed on time, there are several options available to you.
Options for dealing with cashflow problems
If you think your company is not going to be able to pay your staff, here are some things you could try:
- Are you owed any money by customers? If so, collect it as soon as possible.
- Could you collect on forthcoming invoices not yet due, perhaps by offering a discount for early payment?
- Factoring agencies may buy your invoices – although this will reduce the total payment which you will ultimately receive.
- Do you have assets or stock which could be sold without impacting your ability to operate successfully? This can provide useful funding, whilst also clearing up some space within your business premises.
- Contact your suppliers and ask for a time extension on what you owe them.
- A traditional bank loan is likely to take too long if you need the cash quickly, but you could arrange a loan agreement with another individual or business. (Always make sure you understand the terms of any such agreement.)
Still can’t pay the wages?
If you have tried everything you can think of, but you’re still unable to pay your staff on time, then your company is technically ‘insolvent’ – in that it cannot pay its bills when they are due.
As the director of an insolvent company, you have legal responsibilities to take action now.
You are hopefully already speaking to your Accountant, but now is the time also to speak to a specialist advisor – an Insolvency Practitioner.
We can advise you on what your option are now – including how to deal with any necessary staff redundancies and the associated legal complications.
Our advice is free. So, contact us now on 0161 907 4044 or [email protected] to find out what you should be doing next.