Ten Top Tips on How to Avoid Insolvency
Sue talks to Fiona Monson of Solvency Solutions.
What sort of businesses ask for advice or help?
At Solvency Solutions we help businesses in every industry, but it tends to be small one man band businesses or husband and wife partnerships who ask for our help.
The main problem that comes up time and time again is business owners not facing up to problems, assuming that issues will go away on their own. For example some businesses don’t both to keep on top of their accounts, then end up being in a real mess with a very hefty bill to put it right.
Many new business owners don’t have a business background or the right mindset to start or run their own business and don’t realise how hard it can be. They also don’t want to or cant pay to outsource their work or ask for help.
An astonishing estimated 85% of businesses fail within their first year of trading.
What Tips would you give them to avoid getting into trouble?
Ten Top tips:
- Network regularly, do training if necessary and get advice early on.
- Do your homework – test the market
- Be realistic
- Have a contingency plan
- Have your startup and ongoing financial backing sorted from the start
- Be very cautious about borrowing from family or friends
- Be very cautious about personal guarantees
- Be clear about terms and conditions
- Be careful what contractors and clients you work with
- Keep on top of cash flow
There are eight regulatory bodies to comply with insolvency which are being reduced to 5. Pre 1986 there were no regulations.
All initial meetings are free.
How Easy is it to turn around Debt?
It depends on the client – how long the situation has gone on for and the complexity or severity of their problems. It is always best to talk to everyone involved with the company including suppliers and be honest and up front about the situation.
Some companies close shop and start up again elsewhere, but there are rules to abide by, such as trading under a completely new name.
Has the last Recession given you more business?
Not really. New businesses start up regularly but a low percentage of them are prepared enough to make it work, so they turn to us.
According to Government National Statistics:
‘A total of 14,040 companies entered into liquidation in 2014, which was 6.3% lower than the total in 2013 and the lowest annual total since 2007. There has been a decreasing annual trend in company liquidation since 2011.’
How Many Cases do you deal with every month?
It differs from one month to another, can be all or nothing and is totally unpredictable.
Other Advice
Don’t be dependent on one supplier or one client. Bankruptcy and liquidation should be your last resort, even though bankruptcy is removed from your credit file after 6 years (so in effect disappears). Most debtors are actually discharged from bankruptcy after just one year. Also, ensure you know who you are dealing with.
Article written by Sue Edwards, Sue Edwards Marketing for Fiona Monson, Solvency Solutions
