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What To Do If Your Business Is Failing?

Setting up a new business is a challenge, especially if you have little experience. Operating the business, ensuring it remains financially viable, however, is the next challenge faced by many directors and failed.

So before commencing an unknown path, sit back and analyse the main reasons for your current situation, honestly, before approaching an insolvency practitioner.

So what can you do to avoid business failure?

Which options exist?

Common causes of business failure include:

  • Lack o financial management;
  • Offering too much credit to customers;
  • Expanding too quickly;
  • Unexpected costs;
  • Sudden change in business environment;
  • Simply bad luck;
  • Staff theft and fraud within your business.

My Business Is Failing 

Every business experiences problems. However, they all vary.  Therefore, we must understand that the problems, as time is usually of the essence. If you have cash flow problems and cannot pay your debts, don’t wait until you have received a winding-up petition, which leads to compulsory liquidation.  Take an honest look at your business’s cash flow. If you are slipping, paying your priority bills, seek help. Contact John Waller on 0330 056 3120 for a free initial meeting in person or online. Confidentiality assured.

What to do if your business is failing? Embrace Your Business Failure

Failure can only happen if you are prepared to take risk. Often people criticise individuals for failure. Fair game if the loss of a business is due to fraudulent trading. However, we encounter directors who fail and are penalised due to trading while insolvent and not realising the implications.

It is impossible to seek advice sooner than later.

So assuming you have adhered to the duties and responsibilities of directors, you should be proud to count yourself as part of entrepreneurs who have strived for it. Don’t allow failure to diminish your self-confidence or wipe out your ambitions.

Warning signs to watch out for?

Warning signs of company insolvency:

  • Your company is insolvent;
  • You feel constant pressure;
  • HMRC arrears;
  • Recognize risks within the business;
  • Sales enquiries drop off;
  • Dynamic change allowing a drop in the teams desires
  • Your company is insolvent;
  • Marketing plan has failed;
  • Continually carrying out management decisions with no effect;
  • Your company is insolvent;
  • You’re suffering from a high staff turnover;
  • Products you sell or make no longer required EG Video Recorders, Cameras.

What can you do to prevent business failure?

Once you have faced up to your business’ financial predicament, the:

  • Engage with your creditors and agree new payment terms.
  • Arrange a time to pay arrangement with HMRC;
  • Refinance;
  • Meet with a qualified licensed insolvency practitioner and consider your options, such as a CVA or Administration, if your business has a viable future.

Company Directors need to firm up and understand the risks associated with the recovery of your company financially.

What options exist for my business?

Businesses in the UK have faced failure due to the COVID-19 pandemic and the lockouts associated with it, but it is the first step to recognise the likelihood that your business will fail. Many business owners refuse to admit there is a problem, so they bury their heads in the sand and do not take action. Then when the company fails, they are left wondering where it all went wrong!

As a director, you must act in the interests of creditors when the company remains insolvent. Failure to act appropriately could leave you open to personal liability.

If your company remains no longer viable, then a creditors voluntary liquidation  should be considered.

Receiving a Winding-Up Order?

The most important thing to remember is that the longer you leave it to take action, the fewer options will be available to you and your business. Typically, a creditor, often HMRC, issues a winding-up petition. As a director, you should understand the implication of receiving a winding up petition from company creditors, what then?

A winding-up petition, once issued, means a voluntary liquidation is impossible, and a company’s voluntary arrangement is more complex and costly. The court can sometimes strike out a winding-up petition, or we can seek an adjournment of the hearing date, pending the preparation of a CVA, but it is best to avoid this! It can be done, but there is no guarantee of success.

The key step in the winding-up procedure is when the order is advertised, as the bank will then freeze your account and lose control. If you allow the business to be wound up by the court, the official receiver will investigate your conduct as a director. Don’t let this happen – act now!

If the business is viable, it may be a tragic waste of a lucrative business when you could have made a company voluntary arrangement (CVA) allowing you to pay off your debts over time and remain in control of your business.

Understand your position and your business situation

Get to grips with your current situation and the procedures you may need to follow with our comprehensive suite of informative guides:

  • Warning signs of a struggling business: This page introduces you to the key warning signs that indicate your business is in trouble. You’ll also find valuable information on dealing with banks, creditors, account filing/management account, legal action, HR issues and much more.
  • Protecting your company while preparing a CVA: This guide covers the things you need to do to avoid a winding up order, losing control of the company (including your business accounts) and an investigation into your conduct.
  • Dealing with a winding up petition? This page provides an outline of winding up petitions and why you should do your best to avoid one. A winding up petition doesn’t necessarily mark the end, but it can make it significantly harder to rescue your company.

What Happens if a Business Fails?

No one wants to witness businesses go insolvent unnecessarily. As such, there are many options available both through HMRC and via insolvency practitioners, such as ourselves. They include the following:

Time to Pay ArrangementArranging A Time to Pay with HMRC is an agreed structured repayment plan, usually over 12 months, to help you pay your tax bill. Find out more.

Company Voluntary Arrangement CVA explained – Where you cannot pay creditors, the CVA mechanism is a formal payment plan, arranged by an insolvency practitioner, so you can therefore pay creditors at a rate you can afford.

Consider a company administration: For larger companies, the administration offers a moratorium on legal action, which an insolvency practitioner can try to turn around by restructuring to avoid liquidation.

Finance/invoice finance Alternative financing has never been easier to obtain. Many companies, and especially those hampered by late payment of invoices, however find invoice financing a convenient solution,

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Bounce Back Loan advice for Company Directors

Directors should seek professional advice if they have Bounce Back Loan worries regarding repayments. The UK government introduced the COVID-19 support scheme to support businesses through the pandemic. owever, repaying the loans has been difficult. So ensure you seek advice sooner than later.
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