How to Keep Your Business out of Insolvency

The good news is that official statistics show we are coming out of recession – although judging by the insinuations and allegations that the outgoing government cooked the books, it is difficult to know with any certainty just how deep the problems still are.  Whatever the case, experience tells us that even when the Economy starts to recover, there will be continued high levels of insolvencies for around two years.  Many of these failures can however be avoided by businesses taking some very simple steps to plan and monitor their own performance.  Know your figures - it does not need to be costly and can actually improve turnover and profitability.

• Prepare monthly sales and purchases figures, even if all you do is add up the receipts and payments and invoices in and out.  If payments consistently exceed receipts there is a problem which you must deal with.  Put money aside to pay VAT and tax.
  
  
• Control your invoicing: many businesses take weeks, or even months to send invoices to their customers; and then seem to be afraid to chase late payers.  You don’t object to paying your debts on time, so why should your customers? 
  
  
• Prepare forecasts and plan for the future: your accountants can help and you will make extra profits to more than cover their costs.  People often say: ”How can I do a forecast, I don’t know what is going to happen today, let alone in three months?”  The answer is that all successful businesses prepare plans and financial forecasts – and your business is no different from any other in this regard.  Any good business owner can make some educated guesses about what is going to happen, based on previous experience and his expectations of the future.  Forecasts are a tool to measure performance – not a rigid set of rules.  If you compare your actual results against your forecasts you can identify strengths and weaknesses and act on them.
  
  
• Know where your new business comes from.  Stop spending money on advertising if it is bringing nothing in! 
  
  
• Set performance targets and budgets for your staff.  They will thank you if you clearly communicate what is expected of them – and you will almost certainly see improved efficiency.
  
  
• Find a coach, who will help you optimise the performance of your business.  All the best sportsmen and teams have coaches – why wouldn’t it work in your business?

If you start falling into arrears with payments take advice as soon as possible – do not allow the position to become critical before doing so.  Your accountant or bank or an insolvency practitioner will be able to help. 

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