Bankruptcy, insolvency, and financial distress are an ever-present danger for UK businesses nowadays. Thankfully we’ve seen remarkable progress about the COVID-19 crisis, and there are signs of things picking up again.
Unfortunately, the economy is in rough shape right now. Upwards of 0.720 million businesses are reported to be insignificant financial distress as of the end of Q1 2021. That’s a hundred thousand more than were distressed in the previous quarter.
Remaining solvent as in these troubled times can be tricky at best. Many companies are sitting on mountains of debt, with the situation further complicated by Brexit. Fortunately, there are ways to avoid and deal with insolvency that businesses can take. For instance, Consulting debt management specialists such as Hudson Weir Ltd. can dramatically improve your chances of staying solvent.
There are three major steps you can take to improve your chances of staying solvent in turbulent times.
Examine Your Business Relations
Sift through your business process and identify the bottlenecks and the obstacles that are slowing it down. Look for trends rather than individual instances, and think of ways to remedy the problem wholesale.
Getting your hands on crucial materials or delivering goods to your customers are two common problems in this climate. If this is the case, consider putting loyalty aside and looking for more reliable partners that don’t cause logistical issues.
Downsizing is also an option you should consider. Dismissing workers is never a pleasant affair, but if their roles are redundant under your new business mode, you don’t have a choice.
Presently, most insolvency issues experienced by companies stem from revenue stream problems. The key to not letting those get the better of you is maintaining communication with your clients and partners. Talk to them about the issue at the first sign of trouble – or even before that.
Figure out why your revenue streams may be faltering and try to take care of the problem. Diversifying your revenue streams is also a good idea, as there is no telling when one may run dry.
Consider Your Assets & Operation
Liquidating assets is usually the go-to step for companies to avoid insolvency. Doing so can stave off the problem for a while, ideally buying the business enough time to get the ball rolling.
As we discussed above, downsizing may be unpleasant, but it’s an option you should consider if your company shows signs of insolvency. Reducing operational costs can be achieved through various means – for instance, moving to a more affordable office is a viable option. Going entirely digital is a fantastic option you should consider if your business model permits it.
Storage space is at a premium nowadays – reducing that to the bare minimum may cut a significant part of your expenses. Implementing the right logistics software may allow you to achieve more while spending less. Moving your production base of operations to a more convenient or affordable location is also an option you should consider.
Cutting corners in your business process is usually a bad practice. Ideally, you should avoid doing so by optimizing and automating aspects of your business that appear wanting. Unfortunately, you may not have a choice in the matter if you are sitting on the cusp of insolvency. Carefully consider all your options before deciding which aspects of your process you are going to focus on.
Secure Funding & Restructure Debt
There are many strategies you can put in place to brace for hard times. However, by far, one of the most important things you should put in motion is securing funding before you’re in a pinch.
Look for opportunities to make favorable bank loans, or take advantage of grants and government programs aimed at SMEs. There are many such programs out there, and they have done a good job keeping many businesses afloat. Read up on all similar opportunities for acquiring funds. Better yet – consult a professional, such as an accountant or insolvency practitioner. Their insight on the matter can prove instrumental in keeping your company afloat.
Finally, if you have problems paying your debts on time or at all, reach out to your creditors before they start legal proceedings. Try to renegotiate the conditions of your debt. If you play your hand right, you may be able to convince them to postpone some payments. It’s even possible to negotiate a reduction of your debt to something more manageable.