If your business is falling behind on payments, having a hard time paying back debts, or facing slow cash flow, it may be time to consider hiring a team of insolvency professionals to help advise on how to begin liquidating your assets. The earlier you seek professional help, the more likely it is that your business will survive. These professionals will help you find a way forward and find a solution that enhances the interests of all parties involved. If you are worried about the state of your business due to unpaid debts, insolvency professionals can help.
Types of Insolvency Services
Voluntary administration and liquidation are two different types of insolvency services offered by an insolvency company. Voluntary administration is a legal process used to rescue companies facing financial difficulties. Its purpose is to prevent liquidation from happening by assigning an independent administrator to manage the affairs of the company. This is so that the best possible outcome is achieved for everyone with an interest in the business.
Liquidation on the other hand, is a process that essentially ends the company for good and is a last resort option for companies who find that they can no longer pay back their debts. Liquidation involves gathering up all of your assets and liquidating them for the benefit of the creditors. This can include everything from office furniture and office supplies, to contracts with clients and a lease.
Hiring a Liquidator
Although one can liquidate items themselves, it’s best to appoint someone as a liquidator as they will be able to get the best price for your assets and will be in charge of creating a list of everything your company owns and can be sold.
A liquidator’s purpose is also to consider if any breaches of the law have taken place and whether action may be required. After gathering all of the information they need, the liquidator will then file a report with the Registrar of Companies which brings the liquidation to an end.
What Is the Cause of Insolvency?
When it all comes down to it, the main reason for a company to go into insolvency is bad financial management. Granted, there are other factors that can come into play such as the loss of revenue and cash inflow, but all in all, the lack of financial planning is behind a company’s insolvency.
It’s easy to fall into insolvency because many business owners are either in denial that their business is failing, or they are simply unaware. Not having a proper accountant or financial manager can also lead to losing track of your spending, which will start to add up quickly.
When starting up your business, it’s important that you are realistic about your financial goals and don’t rely on too many creditors to build up your business. Start small and create a steady stream of revenue before expanding your business or borrowing any more money.
Another reason that a company can go insolvent is if they underestimate their competition and don’t have a proper business strategy put in place. If you aren’t ready and willing to continue improving your products or your service, your competition may end up dominating you.
If you don’t have enough knowledge on how to run a business, you are more at risk for insolvency. Not having any idea about running a business essentially means throwing your money away.
How Does Insolvency Lead to Liquidation?
As mentioned before, a company may end up having to liquidate when there is simply no way to save it. It occurs because there are no other options for the company’s survival whatsoever. Liquidation is the result of many months of misery and anguish as a result of the company not being able to perform as the directors hoped it would. Essentially, it happens when a company is no longer able to make any money.
Liquidation can be both voluntary or court ordered. If a court decides to take the side of the creditors, your business will be liquidated.
Consequences of Liquidation
When businesses are forced to liquidate, they may be worried about the consequences that come with doing so. After a company liquidates, it can no longer carry out any more business. As a matter of fact, any money that gets made as a result of liquidation goes directly to the creditors. The company’s CEO or owner is also forced to give up power, which is when a liquidator takes over. Of course, all employees are let go as well, although some companies pay out damages to their employees who were on a contract basis.
Getting Professional Help
If your business is on the verge of insolvency, the good news is that there is still a way to turn things around. In order to do so, you must get professional help from an insolvency professional. With their help, you have the ability to get your finances back in order so that you can start paying back your debts and hopefully start seeing some revenue.
Whether your business is big or small, an insolvency company can help you turn things around. If there is no choice but to liquidate, an insolvency company will aim to make the process as painless as possible – financially, legally and emotionally.
Collecting Debts Owed to You
If you, on the other hand, are a creditor who is looking to have their debts repaid, you can also hire an insolvency company to help. An insolvency expert can be appointed to act as the receiver and can manage the sale of the asset used as the original security to repay the debt that is owed to you.
Liquidation is typically the best chance for a creditor to get their money back, but it can be hard to understand the process without the help of a knowledgeable professional. If you are desperate to get any sort of money back that you are owed, you can work closely with an insolvency professional to help you get your money back as quickly as possible.