Do you know if your company is solvent or insolvent?
Some warning signs are harder to spot that others, so it's best to look at all areas of the business to ensure you're prepared if things start to get out of control.
Use these three tests:
Cashflow test - can the business pay debts when they fall due? VAT, PAYE, corporation tax etc...
Balance sheet test - Does the business owe more than it actually owns? Do liabilities outweigh assets?
Legal action test - Have you been issued or threatened with legal actions, like a Winding up Petition, CCJs or distraint?
If any of the above apply to your business, it's likely that it is insolvent. You must act quickly to avoid the situation getting worse but don't panic, there are ways to turn your business around. For example, a Time to Pay deal with HMRC or a Company Voluntary Arrangement may be the best solution.
If you have been issued with serious legal actions, administration can safe-guard the business. You may want potential buyers and those looking to provide investment to purchase the business and assets while in administration too.
Whatever your situation, be aware of the facts and act quickly to minimise risk and personal liability. If you believe your company is insolvent, you can call us on 0800 9700539 for expert advice on turnaround and insolvency solutions.