According to Entrepreneur.com, roughly 70 percent of businesses can expect to fail in the USA. Sometimes the problem is that business ownership committed to a product that nobody wanted to buy. Other times, the issue was that the company had the misfortune of coming into the market at a bad time.
But, if we’re being honest, company insolvency often boils down to a single issue:
Not having enough money to stay profitable.
When you’re a small business owner who has to worry about drumming up business, finding top-notch employees, and keeping up with overhead costs, the risk of insolvency can quickly start to feel a little too real. How can you approach the issue without losing your mind? What practical steps can you take when your company is struggling to keep the lights on?
We’ve put together a list of ways that you and your management team can stave off insolvency. Just keep reading to learn more.
Contents
1. Get Some Control Over Your Cashflow
The basic definition of maintaining a solid small business cashflow is pretty straightforward on paper. You just want to make sure that you’re bringing in enough money that you’re able to pay your bills and make payroll without having to struggle.
However, in practice, when you’re wearing a lot of hats and keeping a lot of plates in the air at once, this is easier said than done. But the good news for small business management is that there are practical steps you can take to get back in control of your finances.
For starters, you can maintain strong in-house practices. Depending on your business model, you may have to introduce a faster billing cycle or have standard internal controls when it comes to accepting credit. Or, if you’re an agency of some kind, you might benefit from having a general policy of not letting one client account for more than a quarter of your total revenue.
The good thing about starting and implementing practices like these early is that if you’re thinking of raising funds through loans or VC capital, you’ll already have the makings of an investor-attracting business plan.
2. Try and Negotiate With Your Creditors
Let’s assume for a minute that you’re past the I-would-desperately-like-to-avoid-financial-ruin phase and you’re actually under some financial pressure to pay the bills. What can you do to turn things around?
As it turns out, even if your creditors are blowing up your phone and accounting for a third of the emails in your inbox, they are just as interested in your company’s financial survival as you are. What this often means is that if you can give them the option of getting their money, they’ll often be more open to negotiating than you might think.
Some of the options at your disposal might include the use of structured payment plans that will allow you to pay a set amount each month until your debt is repaid. But depending on the state of your balance sheet and how much your company owes, creditors may be willing to write off a portion of the debts or to accept longer repayment periods if the alternative is not getting their money at all.
You might be surprised at what you can accomplish by picking up the phone and giving your creditors a call.
3. Work on Your Cashflow Forecasting
When you own a business and you’re one of those people who isn’t making things up when you talk about doing what you love and loving what you do, it’s tempting to be wildly optimistic with your numbers. To be clear, there’s nothing wrong with having big dreams. And if you can hit your targets, you’re obviously doing better than a lot of other businesses.
However, when it comes to making plans for the future of your company, you may want to start with more conservative numbers. In addition, it’s also important to sit down and think about what you’ll do if and when the going gets tough.
Does your line of work tend to be seasonal? Are you often depending on your ability to prospect for leads? What will you do when your customers are on holiday vacation and not as willing to read through your proposals?
If you make sure that your cashflow numbers are as grounded as possible, it becomes easier to manage situations where you may not have as much money coming in as expected.
4. Consider Working With an Insolvency Professional
Let’s assume for a minute that your company is caught in a deep financial hole. Metaphorically and literally, you have nowhere to go but up. If you’re on the verge of bankruptcy and your accounts are emptying faster than you can fill them, do you still have a chance at salvaging your business?
The answer is “Yes, but you may have to consider working with a professional.”.
Whether you’re trying to turn everything around or you’re just looking to manage payments and exit the business as smoothly as possible, someone like Antony Batty can help with that. These professionals have experience talking to creditors and a deep understanding of company finance, so it can be easier to get from point A to point B under the guidance of a seasoned pro.
Here’s How You Can Tackle the Issue of Company Insolvency Head On
The thought of going through company insolvency is enough to keep many business owners up at night. But whether you’re trying to head off an issue before it gets bad or you’re dealing with real financial pressure, there are still steps you can take. From shoring up your company’s internal practices to working with a company administration professional, business managers and owners have more financial options at their disposal than they may think.
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