Plan ahead to stay ahead
It is of course better to avoid getting into serious debt in the first place. The good news is that with some planning, monitoring, and the right habits, many of the common insolvency traps can be avoided entirely. The tips below come from over 25 years of experience working with directors across the South East.
Financial Management
- Keep your books up to date, don't let financial records fall behind. Accurate, timely accounts give you the clearest picture of your position.
- Take an in-depth look at your cash flow regularly, not just when trouble appears. Cash flow problems are often visible weeks before they become critical.
- Pay your taxes on time. HMRC debt is one of the most common triggers for insolvency proceedings, and one of the most avoidable.
- Try to avoid giving personal guarantees for loans or company debts wherever possible, as this can put your personal assets at risk.
Managing Costs & Suppliers
- Negotiate with your suppliers and shop around regularly. Many businesses overpay for utilities, insurance, and services simply because they haven't reviewed contracts recently.
- Control your outgoings proactively, small savings across utilities, subscriptions, and services can add up to significant improvements in your monthly cash position.
- Consider leasing instead of purchasing assets outright, to preserve cash and maintain flexibility.
- Ensure your business is correctly structured, the right structure can significantly affect your tax position and personal liability exposure.
Customers & Revenue
- Credit-check your customers, especially before offering significant credit terms, and monitor their financial behaviour over time.
- Define clear invoicing and payment terms from the outset of every client relationship. Ambiguity about payment timelines is a common source of cash flow problems.
- Consider staged payments, advance payments, or early payment discounts to improve the predictability of your income.
- Avoid over-relying on a small number of key customers or contracts, if one disappears, your entire business can be exposed.
Trading & Growth
- Investigate your competition regularly, knowing how your competitors are performing can give you early warning signals about market conditions.
- Create and maintain a marketing strategy. Businesses without a clear approach to attracting new customers are more vulnerable to revenue downturns.
- Ensure you can deliver what you promise. Overtrading, taking on more work than you can reliably complete, is a surprisingly common cause of business failure.
- Be realistic and honest with yourself about whether your business model is sustainable at its current scale and in current market conditions.
Remember: if despite your best efforts you find yourself in financial difficulty, the worst thing you can do is ignore it. Financial problems rarely resolve themselves, and early action always creates more options. Contact us, our advice is always free.