If you are concerned that your company is at risk of becoming bankrupt, you should act fast. As soon as you recognise that you are not able to pay your company’s necessary expenses, or your liabilities are greater than your assets, you are at risk of bankruptcy and should act before your company goes into liquidation.
What should you do to minimise your company’s risk of bankruptcy?Â
There are certain best practices that you can follow to stay on top of finances and prevent your company from reaching the point of bankruptcy.Â
- Pay off your debts
The first thing to do if you are trying to avoid bankruptcy is to start repaying any debts you have. Consider who is owed money and how much in order to prioritise the most important bills and pay them off in order of importance.
- Cut out non-essential spending
One of the best things a business can do is to know exactly what they are spending their money on. This means that if they are trying to cut their spending, they can assess what is essential spending and what is non-essential spending.Â
Doing this allows you to analyse if you are spending money on areas that are unnecessary or where you could be using a cheaper alternative which can help you cut your expenses and save money for your business. Cut costs for anything that does not directly contribute to the running of your business and use the leftover money to go towards repaying your debt.
- Increase your revenue
During this time, you should be trying to maximise your income as much as possible. That may mean looking at ways to earn passive income, sell new products or offer more availability for your services. This step may require some creative thinking but maximising your revenue streams can be a great way to earn extra money and keep your company further from bankruptcy.
- Sell non-essential assets
If your business has any assets that are non-essential to the daily running of your business, it may be worth selling them. For example, if there are any assets that you do not use anymore. Think about material assets such as company vehicles or office spaces where you might be able to sell or downsize. Any assets that you could sell or change for cheaper alternatives will help you come up with extra revenue which can be used to pay off debts.
What should you do if your company is at high risk of bankruptcy?
If your company is at real risk of bankruptcy, there are certain steps you can take:
- Seek professional help from a licensed insolvency practitioner who can assess your company’s situation and help with next steps
- Take out a Company Voluntary Arrangement (CVA) to restructure your company debt and start repaying creditors according to a new repayment plan
- Get funding to see if you can inject cash into the company and prevent if from bankruptcy
- Undergo a company restructuring and relieve some financial pressure by laying off staff or selling some company assets
- Go into administration to prevent legal action against the company and plan next steps
