Why do businesses become insolvent?
By Mr Bankruptcy
29th August 2019
When a business is in financial difficulty the transition into insolvency can sometimes be swift. As a business owner, you need to be aware of the early signs to look out for that could indicate that your business is at risk of becoming insolvent.
What is insolvency?
A business becomes insolvent when it can no longer pay its debts when they are due or it has more liabilities than assets.
When a business finds itself in this situation there are several options available to it that can either allow the company directors to try and rectify and take control of the financial situation or to provide time while plans to sell the business are made.
What can cause a company to become insolvent?
There can be several changes that can seriously impact on the financial situation of a business and potentially lead to insolvency:
- Cash Flow: If you regularly don’t have the cash to cover your day to day operating expenses
- Increased competition: New competitors are attracting your clients or making it harder for you to attract new business
- Loss of a major customer: An important customer that provides substantial income will have a dramatic effect on your business if lost
- Large debts: When they continue over a long period of time the impact of these debts is compounded as more money must be repaid
- Lack of stable sales: Makes it hard to manage cash flow or to invest
- Key staff leaving: If they hold particular knowledge or skills, their departure can have a substantial impact on business operations. Team morale can also be affected when an integral member departs
- Excessive borrowing: This becomes challenging if you begin to experience low sales, leaving the business exposed.
Signs that a business is in distress
Being aware of some of the causes of debt can help you look for signs that the business may be in trouble. The Institute of Chartered Accountants in England and Wales (ICEAW) suggest the following can be signs that a business is in distress:
- Spending is greater than earning on an ongoing basis
- Higher interest payments as lenders view you as a risk
- Frequent defaulting on bills
- A rise in debtor or creditor days; the former leads to suppliers ending vital supplies while the latter situation, failing to chase debts, impacts on cash flow
- Falling margins as high cost and low income become unsustainable
- Staff unhappiness can be an indicator that something is going wrong, especially at senior levels.
If you think your business is in this situation it’s important to take prompt action. Seeking advice quickly can help prevent the situation getting worse and allow you to determine the best approach to move forward.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. Taking a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors facing unmanageable debt or involved in civil or commercial disputes.
Our services include:
- Insolvency support
- Negotiated settlements
- Personal assisted bankruptcy
- Mediation
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
Find out if you qualify for a free consultation
If you want to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for a free consultation.
We’re A Finalist!
James Rosa Associates are thrilled to announce that we have been selected as a finalist at the prestigious 2019 Collections & Customer Service Awards in the category of Debt Advice Provider of the Year.
James Rosa Associates Managing Director Julian Donnelly said “Just to be included alongside StepChange Debt Charity and PayPlan is a fantastic achievement and we hope this will give us an opportunity to continue to shine a light on the issue of vulnerability.”
Supporting vulnerable clients with debt management
By Mr Bankruptcy
12th August 2019
As a debt advisor I see the profound effect that unmanageable debt has on any person’s wellbeing but particularly on those people who are in a vulnerable situation can find it additionally difficult to manage their debt.
There is no single approach to managing debt and each client’s needs are different to the next, so it’s essential if you’re in that position to find a debt advisor able to help you no matter what your particular circumstances are.
The impact of debt
When supporting clients who are managing debt, we find many situations that can make people particularly vulnerable, for example if you’ve experienced recent bereavement, suffered from long term illness or a relationship has just broken down.
One of the impacts we see most frequently is the effect of debt on people’s mental wellbeing, the increased stress and anxiety, exacerbated by the subsequent lack of sleep it causes. The Mental Health Foundation suggests that a lot of debt related anxiety comes from people not getting enough support from those around them, be they creditors, family, friends or employers. Without this support the burden of debt is felt more keenly.
How a debt advisor can support clients
Experienced debt advisors want clients to feel part of the debt management solution. To achieve this, the following are important:
- Information is provided in a clear manner
- Clients are given all the information they need to make informed decisions based on all options
- Advice is tailored to circumstances and delivered in a way that suits each person
- Clients are confident that their advisor is working in their best interests by building a relationship built on trust
- An advisor is qualified to ensure all legal and regulatory obligations are met to prevent further problems
One particularly vulnerable client we supported had suffered a breakdown after his business had gone into liquidation and his relationship had ended.
A case study
He was dealing with substantial debts but had no assets or income and it seemed that bankruptcy was his only option. Some additional financial support became available to him and we were able to manage a substantial write-off of his debts by working with creditors, making them aware of the circumstances and then negotiating on our client’s behalf. I’m delighted to say he’s now doing very well.
What is important to take away from this situation is that, with the right support and advice, it is possible to manage what can often feel like an insurmountable situation and that your personal circumstances should always be taken account of when coming up with a realistic solution.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners and directors facing unmanageable debt or involved in civil or commercial disputes.
Our services include:
● Insolvency support
● Negotiated settlements
● Personal assisted bankruptcy
● Mediation
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
Find out if you qualify for a free consultation
If you need to deal with debt that has become unmanageable, or to bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for a free consultation.