Trading in credit-starved times
Tips for business survival
Sue Ziegler from Seth Lovis & Co solicitors provides these business survival tips for avoiding insolvency.
What is insolvency?
It is perhaps worth revisiting the ‘definition’ of insolvency. If your business assets equal the amount of debt you owe, then all of your capital could be exhausted. In these circumstances your creditors (people you owe money to) effectively own your business.
Where a business is unable to pay its debts as they fall due then it is insolvent, and the insolvency may in turn lead to the business being wound up or put into liquidation.
Here are Sue’s top tips for business survival:
1. Refine your business structure to maximise profitability
The time may be right to reconsider whether your existing corporate structure is best suited to your trading activity. Moving to an alternative structure (sole trading, partnership, limited liability partnership or limited company) may have beneficial legal and tax implications.
2. Tighten up cash flow
It’s crucial at the present time for SMEs to recoup monies owed to them.
Make sure you put all payment deadline dates into a diary, and immediately chase for payment as the deadline falls due.
You should also revisit your procedures in relation to customers who default; these may include threatening legal action, having solicitors at the ready, or using a factoring company. Remember, the objective is to prevent the debt from turning bad.
3. Reinvest profits into the business
The rationale for being in business is to draw down profits, and in easier circumstances this is hopefully achievable. However in these credit-starved times, reinvesting profits bank into your business will help maintain sufficient assets.
4. Ensure administration is in order
Investing some time now will minimise problems at a later stage and reduce the drain on your resources. Check all your commercial contracts are up to date and filed where you can find and refer to them. This may assist with debt collection, and any potential or future supplier, customer or employee disputes. If difficulties do arise, taking early advice may enable interventions that help you avoid going out of business.
To contact the author about any matters relating to this article, please call Sue Ziegler on 020 7420 7063 or email her at sziegler@sethlovis.co.uk
Seth Lovis & Co is a firm of solicitors based in Covent Garden offering legal advice and representation to SMEs across London and the South East.
Trading in credit-starved times
Tips for business survival
Sue Ziegler from Seth Lovis & Co solicitors provides these business survival tips for avoiding insolvency.
What is insolvency?
It is perhaps worth revisiting the ‘definition’ of insolvency. If your business assets equal the amount of debt you owe, then all of your capital could be exhausted. In these circumstances your creditors (people you owe money to) effectively own your business.
Where a business is unable to pay its debts as they fall due then it is insolvent, and the insolvency may in turn lead to the business being wound up or put into liquidation.
Here are Sue’s top tips for business survival:
1. Refine your business structure to maximise profitability
The time may be right to reconsider whether your existing corporate structure is best suited to your trading activity. Moving to an alternative structure (sole trading, partnership, limited liability partnership or limited company) may have beneficial legal and tax implications.
2. Tighten up cash flow
It’s crucial at the present time for SMEs to recoup monies owed to them.
Make sure you put all payment deadline dates into a diary, and immediately chase for payment as the deadline falls due.
You should also revisit your procedures in relation to customers who default; these may include threatening legal action, having solicitors at the ready, or using a factoring company. Remember, the objective is to prevent the debt from turning bad.
3. Reinvest profits into the business
The rationale for being in business is to draw down profits, and in easier circumstances this is hopefully achievable. However in these credit-starved times, reinvesting profits bank into your business will help maintain sufficient assets.
4. Ensure administration is in order
Investing some time now will minimise problems at a later stage and reduce the drain on your resources. Check all your commercial contracts are up to date and filed where you can find and refer to them. This may assist with debt collection, and any potential or future supplier, customer or employee disputes. If difficulties do arise, taking early advice may enable interventions that help you avoid going out of business.
To contact the author about any matters relating to this article, please call Sue Ziegler on 020 7420 7063 or email her at sziegler@sethlovis.co.uk
Seth Lovis & Co is a firm of solicitors based in Covent Garden offering legal advice and representation to SMEs across London and the South East.