Insolvency is perhaps the biggest fear and challenge for any business because it can even lead to something as drastic as closure. There are also chances that your organization may fall prey to expensive court procedures, which can result in loss of reputation and sometimes dissolution. Therefore, it becomes important to pay heed to the issue if you feel that your business is at the brink of insolvency. The clear red flag that indicates this is the inability to keep up with your financial obligations and maintain your cash flow. When you come across any such symptoms, it is time to start thinking about business recovery so that you can rescue your enterprise before it is too late. Here are some measures that you can take to protect your organization from insolvency.
- Focus on your strengths- the best customers
Every business has a diverse customer base, namely the ones who are your strength and the others who are your weakness. When the company faces a financial crisis, it should focus on the best customers. These are the ones who are not too hard to persuade and are always willing to pay the invoices on time. You can improve the regular cash flow by concentrating on the reliable and profitable buyers. This is not the best time to try expanding your customer base as there is no surety that they will lucrative in terms of timely payments. With this comes the risk of blocking your funds and increasing your marketing investment, both not being the best things for a company that is struggling financially.
- Cut down costs to repay the creditors
Besides improving your cash flow, you should also try to reduce your debt burden if you want to deal with financial crisis effectively. Cutting costs is a great idea and it is even better if you can redeem the saving to pay off the creditors. This will give you a dual benefit, firstly by reducing the day-to-day expenses and secondly by alleviating the burden of interest on your business loan and credit. Cost cutting can be availed by saving on salaries as well as operational costs such as purchase of equipment and marketing. The focus should rather be only on the core business activities that are to be carried on to sustain through the tough time. If you pay up the creditors at such a time, the reputation of the business will improve and investors will be willing to help you when in need.
- Call in all the outstanding debts
When the threat of bankruptcy is looming, it is advisable to lean back on all your resources first. While the business may have some creditors they need to pay off, there may also be some debtors who owe money to it. This is the best time to call in all the outstanding debts and procure the funds to stabilize your position. The amount so received can be used for improving the cash flow or paying off some urgent loans, as the need may be. Connect with your debtors and send them reminder notices to pay as soon as possible. You can get help from a debt collection company to ensure quick recovery if some debtors fail to pay back despite reminders.
- Explore different funding options
Another measure to enable business recovery in the event of an impending insolvency is to explore all the funding options that are available to your business. Borrowing cash is an excellent option if you are eligible for a bank loan. Alternatively, you may try to procure funds from a private lender if the interest rates are not exorbitant. You can pledge some of the corporate assets to get out of a sticky situation. Releasing the asset will be easy once your business is back on track.
- Seek professional expertise
If you are too hassled by the thought of going bankrupt in the near future, availing insolvency advice from the experts may be the best thing to do. There are several professional companies that are engaged in such services and advice the financially struggling businesses about ways to improve their position. From guiding about improvement of daily cash flow to debt management advice and procurement of funds, there are numerous services that they offer.
Facing insolvency can be stressful for any business owner but the right planning and action can save them from losing the business. Having an expert to assist you is the best option to recover your business and handle the threat of falling prey to insolvency.