Protecting Your Business Against Insolvency
Many businesses are feeling the strain as the economy enters a time of global uncertainty.
Business owners face a shared set of concerns, ranging from labour shortages and supply chain issues to growing expenses and seismic swings in customer behaviour.
Insolvency will be one of the most serious risks to many business owners during these difficult times. While there is no silver bullet, there are a few things that must be done correctly to avoid serious damage.
📌 ADVANCE PLANNING
Make sure your company does extensive planning and forecasting activities on a regular basis. Also, ensure that the top management team is well briefed (or is included in the process).
You will not be able to control everything. However, any modifications must be included into your advanced plan in real-time. For example, if you hire new employees, make changes to your cash flow forecasts.
📌 EARLY WARNING SIGNS
Be mindful of the early warning signals of insolvency. Don’t disregard your gut instinct if it tells you something is a problem. Late payments, cash flow concerns, and growing debt levels are all clear warning signals. Don’t bury your head in the sand and seek guidance as soon as possible.
📌 USING FINANCE
Depending on your previous activities, smart financial management can provide a safety net if things go wrong. There are several solutions, but use caution. Borrowing money (in whatever form) carries its own set of hazards. Consider if innovative financing is part of a well-defined strategy or whether it is simply kicking the can down the road.
📌 TURNING THINGS AROUND
Once you’ve discovered an issue, you must devise a short-term strategy for avoiding it. That might mean taking steps to resolve cash flow difficulties. Beyond that, you’ll need a long-term strategy for strengthening the company’s financial health and preventing similar crises in the future. This might entail collaborating with a strategic partner to turn the firm around and develop it. Or might entail seeking a new owner for your company.
📌 GET READY FOR THE WORST AND HOPE FOR THE BEST
Although no one wants to think about it, it’s necessary to be prepared for the worst-case situation. If your company becomes insolvent, you’ll need to know what to do to limit the harm and safeguard your personal money.
