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How an Insolvency Practitioner can Help Your Business

Sep 19, 2018 | Written by Cliff Sanderson

Insolvency is a real risk of doing business, and most business owners aren’t trained to deal with these issues. Many people in business aren’t even too sure what insolvency, liquidation or related matters really involve. It’s always advisable to get professional assistance in any situation where business viability is in question, and an insolvency practitioner can do a lot to clarify issues and find solutions.

Recognizing insolvency risks to your business

The simplest way to express the concept of risk of insolvency is to define it in measurable dollar terms. The traditional expression “Able to meet expenses as and when they fall due” is a good description of how to view the dollar-based measurements.

Basic risk of insolvency can be determined by projecting costs and revenue:

  • The simple version- If you’ve got liquid assets of $10,000 and revenue of $1000 a month, with expenses of $5000 a month, you’re at risk of insolvency within 3 months. Your assets and revenue combined can’t cover your outlays.
  • The complex version- If you’ve got assets of $100,000, revenue of $10,000 and credit owing to you of $50,000 with monthly outlays of $20,000 you’ve got a far more complex situation. This state of affairs will involve a risk of insolvency within 8 months if you don’t receive that $50,000. You will also need to look at the disparity between your revenue and outgoings, even if you are paid the money you’re owed, because at that rate you could be insolvent in 14 months.

Extremely important: The main reason most businesses become insolvent is that they simply do not look ahead and anticipate risks. The degrees of complexity vary, but that’s the bottom line. This method of calculation is reliable, and it allows you some time to get yourself out of the situation.

Getting professional help when you need it

Your calculations are the basis of identifying the issues threatening the business. You will, however, need help managing the problems. Businesses take time to turn around and make the right changes. In the cases outlined above, for example, there are clear needs for drastic changes to outlays which are a part of existing business operations. To do things like that properly requires expertise and extensive business knowledge.

If you’re faced with issues which look dangerous to your business, get help, immediately. Professional business advisors can be absolutely invaluable in terms of providing solutions to a whole suite of business problems.

What an insolvency practitioner can do for you

Insolvency practitioners are experts in the field of managing businesses with problems of this type. This is more than an advisory service. It’s a potential survival mechanism for businesses which can turn themselves around, and a major benefit for businesses in real trouble which may need to undergo receivership, voluntary liquidation , or other serious matters.

Insolvency practitioners can provide:

  • Advisory services
  • Expert analysis
  • Problem solving
  • Situation-specific guidance for business viability issues
  • Assistance with statutory and some legal processes

In cases of an immediate or impending threat of insolvency, insolvency practitioners are your first, best choice for dealing with the issues rapidly and properly.

Cliff Sanderson

Cliff Sanderson