February 13th, 2011 : by Cliff Sanderson
Business insolvency can involve a range of factors, but there are always common elements. Capital management, cashflow, and business decisions can all be factors. In some cases, there are “no fault” issues, and business contract problems or failures of business associates can play roles in insolvencies. It’s important to recognize that business insolvency and liquidation is preventable and that advice is readily available.
Business insolvency- Common issues
Most people are aware of the statistic that over 50% of “businesses fail in their first three years”. The fact is that risks in the first years are the fundamental ongoing risks to businesses, however long they’ve been in operation.
There are multiple reasons for this situation:
Major causes of business insolvency
Insolvency, when it happens, is actually caused by loss of capital, loss of revenue and loss of credit. A business in the process of becoming insolvent really is like “death by inches”. Although many businesses are all too well aware of their problems, they fail to deal with the issues correctly.
Problems drag on and are exacerbated by a tangle of situations, like credit problems, waiting for payments that never happen, accumulating bills and similar disasters. Problems compound and multiply. These common issues, if they’re allowed to continue, resolve themselves into sudden unexpected crises.
The effects of business insolvency
Business insolvency can occur in degrees of difficulty:
Direct personal liabilities on business owners depend entirely on the circumstances of the situation. If any breaches of law are involved, these liabilities can make a bad situation much worse.
The only way to really deal with the threat of business insolvency is to get professional help. Don’t wait for miracles. Get advice ASAP.