subject: A Common Sense Guide To Avoiding Business Insolvency [print this page] Nobody wants to see a business fail and, for accountants, successful long-term clients are always good news. NWN Blue Squared's Nick Lawrence looks at how to prevent your company becoming business road-kill.
The relationship between chartered accountants and insolvency practitioners is an important one, though not always comfortable. On the one hand they, too, are professionally qualified business advisors that can offer critical advice aimed at preventing companies in difficulties from losing everything.
If the time should come when a business has to declare itself (or be declared) insolvent, the company accountants will work closely with an insolvency team to try and salvage the best outcome for the business and its creditors.
The unexpectedly good news is that, despite going through a double-dip recession, the number of insolvencies has fallen consistently in 2010, 2011 and again this year.
The bad news is that one third of the UK's insolvency practitioners believe they're in for a more profitable year next year with more companies predicted to go under in 2013.
To avoid the threat of becoming road-kill on the journey through your business life, here are some valuable tips that any company owners or directors should consider:
Be informed: A clear, monthly dashboard of key financial indicators and a regular set of management accounts is essential for any business. This provides a snapshot of the current state of the company as well as picking up any potential cash-flow, payroll or other accounting issues in the short-to-medium-term
Plan ahead: Whilst short-term survival is always critical in a recession, failure to look up and look ahead is just as important. Consider what resources, suppliers or client sectors may need to be developed once the economy, and business, starts to pick up.
Curb your enthusiasm: Growth is important to any business, but the post-recession temptation will be to grab every opportunity and expand accordingly. Growth should be based on solid foundations, strong cash-flow, clearly targeted client sectors and the ability to sustain the larger business should times become difficult again.
Don't be an ostrich: If you have planned, reviewed and marketed and the numbers still don't add up, don't hide from the situation. Spot the trends early and seek professional advice from your accountant or other business advisors.
As a chartered accountant practice which has developed its client relationships based on long-term, year-round advice and support, the team at NWN Blue Squared would far rather be working with successful, sustainable businesses than a team of insolvency practitioners
