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Company Cash Flow Problems: What are your options?
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Company cash flow problems
Cash flow problems can be an early warning sign of impending company insolvency. When cash flow becomes squeezed the situation can quickly escalate, leaving the company unable to pay its liabilities and other overheads as and when they fall due. When this happens, the company can be said to be cash flow insolvent and swift action needs to be taken to rectify the situation.
Cash flow problems can be defined simply; it’s when debt payments outweigh the money coming in.
A company is insolvent when it becomes unable to meet its financial liabilities as and when they fall due, and although this is not necessarily the same as having cash flow problems, there is usually a close connection between the two.
Business cash flow problems open the door to a number of other issues which, if left unheeded, can lead to formal insolvency proceedings being commenced against the company.
You’ll need to be honest with yourself and face up to figures in front of you - your cash flow issues may be just a temporary problem that can easily be resolved, but also consider whether you’ve been in denial and there are serious underlying issues which will take radical steps to rescue the business in order to save the company from closing.
Once a company begins experiencing cash flow problems the biggest worry for directors is being faced with a winding up petition by creditors which means your company may potentially be a matter of days from liquidation.
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There are several different ways in which cash flow may be improved, such as by increasing income, improving profit margins or by reducing the debt repayments to creditors through formal or informal negotiations. Therefore, if you're unable to increase income despite your best efforts and you can't afford to pay off your bills and debts, then the only remaining option for rescuing your business from insolvency is to approach your creditors and HMRC with some type of payment plan proposal to begin the route to recovery.
Real Business Rescue specialises in dealing with creditors such as HMRC and can negotiate payment plan arrangements on your behalf or look into funding options such as invoice factoring to allow your company more breathing space. Invoice factoring allows you to take a loan against business debts that are owed to you by customers. If outstanding invoices are causing you to operate without adequate cash flow, this could be the best short-term solution for your company.
For more information on how to handle cash flow problems and the options available for your company, you can arrange a free consultation with a Real Business Rescue specialist at one of our 100+ Offices or you can call our specific director hotline for immediate and confidential advice from a licensed insolvency practitioner.
Once a company begins experiencing cash flow problems the biggest worry for directors is being faced with a winding up petition. It may be just a temporary problem that can easily be resolved, but the underlying issues could be serious which will require more formal restructuring help. Business cash flow problems open the door for a great number of other issues which can lead to formal insolvency proceedings unless you seek help from professional insolvency specialists at the very first warning signs.
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In a nutshell, a cash flow problem is simply when debts outweigh the money coming in. There could be a number of reasons why a business has a deficit in available funds, but usually the sources of cash flow problems can be categorised into three main areas:
- A surplus of outstanding/uncollected invoices
- Products/services not moving
- Poor business model/ineffective management
Is your company insolvent?
If your company is insolvent you have a number of legal responsibilities that you must adhere to. Taking steps to protect creditors from further losses by contacting a licensed insolvency practitioner can help ensure you adhere to these duties.
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The first step to resolving a cash flow problem is to get to the root cause of what is causing the current issues before assessing the scale of the problems being faced. Keep in mind is that cash flow problems could be seen as an indicator that your business is insolvent.
If you believe your company may be insolvent, you should make it a priority to talk to an insolvency practitioner as a matter of urgency to understand what options you have for dealing with your creditors.
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If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
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Whether we need to help restructure your business, help you obtain financing or set up a Company Voluntary Arrangement with creditors, there is an answer to your financial worries. Sometimes these matters can be cleared up quite quickly. When advising how to avoid cash flow problems and the consequences of having no working capital, we may suggest invoice factoring if you have a surplus of uncollected debts from your customers. On the other hand, if your company has outmoded products or ineffective management, we may suggest Administration and restructuring to keep the creditors at bay.
Our ultimate goal here at Real Business Rescue is to find a means to help your company survive financial distress. The initial consultation is free, we can get right on the problem and nothing will have a fee attached unless we render a service for you. Cash flow problems don’t need to signal the end of the road for your company. Call us today to see how we can help you turn your current problems around. We are Real Business Rescue experts!
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Further Reading on Company Cash Flow Problems: What Are Your Options?
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Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
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