A business in a state of jeopardy is always going to require the making of difficult decisions, even more so if the owner has direct involvement in its day to day running. It can be an emotional process which is why any decisions made should be well thought through to assess their impact.

There are several steps you should take when you find yourself in this position, from shoring up your financial position as well as going some way to try and protect your assets. If your business or any business you’re closely involved with is failing, hopefully this article will go some way to helping you improve the situation.

Why Do Businesses Fail?

The primary function of any business which isn’t styled as not for profit is to make money. If you’re making less money than you’re spending on a long term basis, your business is likely going to fail.

The timeline of its failure will vary but there is only so much money you’ll be able to borrow and only so long you’ll be able to hold off your creditors.

Over 100,000 businesses fail every year in the UK and the number one reason for this is due to poor financial management.

Early Intervention is Key

The key to surviving a period of difficulty is to identify exactly when your business is starting to struggle. For this reason, having full knowledge of your cashflow situation is key.

Quickly identify the cause of your cashflow issues and draft a solution as to how you’re going to fix them.

If you’re reliant on invoicing your clients for work or goods delivered, are you being paid on time? If not, why not? Are the terms of your contract insufficient? Is your client themselves going through a period of difficulty?

The answer to these questions will form part of your next course of action.

Find and Propose a Solution

Once you’ve identified the reason for your cashflow problems, it’s time to put a solution into action.

  • If your debtors are refusing or unable to pay your invoices, you will need to start legal proceedings. The sooner this is done the better.
  • Once a judgment has been reached in court, your client will have the option to pay whatever is owned to you, and if they can’t, you need to commence the recovery process.
  • The involvement of civil recovery services is never pleasant but it may be the only way to keep your business afloat.

We would never suggest borrowing more money unless what you’re experiencing is just a temporary blip. If you can guarantee that your financial position is going to improve imminently, it may be worthwhile extending a line of credit available to you and repaying it as soon as you can.

Hire the Experts

There will always be someone to assist if your business is in a precarious position. Business recovery solutions are available to businesses in need of expert help to turn their fortunes around. If there is a solution that can be enacted to save your business, it will be. If not, they are well versed in limiting the amount of financial hardship you will endure.

Whatever you do, you need to take action as soon as possible. Whatever is negatively impacting your business isn’t going to resolve itself so either find a solution or seek further help.

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