There are always risks and rewards involved as a business owner. There will be plenty of challenges along the way. Some of the challenges might even be a significant threat to the viability of your company. It is important that you know the signs of serious trouble for your business so that you can right the ship as soon as there is any sign of trouble. Principle Insolvency is here to talk about some of the red flags that business owners should be looking for that mean their business is in serious risk of insolvency.
Red Flags for Businesses on the Verge of Insolvency
All business owners should know and be aware of the following red flags that mean their business is in trouble and at risk of insolvency.
– Working Capital Struggles: If your company doesn’t have the money to cover day to day expenses, it is cause for concern. The working capital for your company is the lifeblood of the entire operation.
– Under Break Even Point: Your break even point is the number where the revenue and the total costs of the business are at the same level. When you are repeatedly under that break even point, this is a sign of trouble.
– Bill Pay Difficulties: You should be able to pay things like rent, payroll, utilities and other daily expenses with the revenue you bring in. If you can’t reach those obligations with your daily revenue, this is a warning sign that you shouldn’t ignore.
– IRD Formal Review: The Inland Revenue Department (IRD) may place a company under formal review to take a closer look at their financial position and ensure they are tax compliant. A review like this means that there are signs that show your company is in trouble.
– Difficulty with Loans: If your company has a difficult time getting any new loans or funding with out a personal guarantee, there is a concern with your company’s creditworthiness. This shows that lenders don’t have much confidence in your company and its ability to pay back the loan.
How to Address Insolvency
There are several things that can be done to deal with signs of insolvency.
– Seeking professional advice from licenses insolvency practitioners or other financial advisors
– Implementing several cost cutting measures
– Negotiating with creditors to come up with new, revised repayment plants
– Explore any new financing options available including equity investments or asset backed financing
– Consider implements business restructuring to improve efficiency
– Come up with a realistic turnaround plan to guide your business out of trouble
– Ensure you are complying with all legal obligations you have
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you are worried that your company is at risk of insolvency, you can turn to Principle Insolvency to help you explore the options that are available to you. We will help you navigate this challenge as we help you find the best solution for your company. Call us today!