Understand Your Company’s Financial Health
If you’re a company director facing growing bills and unpaid liabilities, now is the time to take control. The first step in effective company debt management is a full, honest assessment of your financial position. Review your profit and loss statement line by line. Are all expenses necessary? Are you getting the best value, even on staffing costs?
Cut Costs Without Cutting Corners
Review your recurring expenses to identify areas where you can save. Have your rent or office supply costs crept up over time? Make sure you’re not overspending. However, always be cautious with essentials like business insurance – cutting back here could ultimately cost more.
Chase Outstanding Payments
Cash flow is king. If your company is owed money for completed work or services, make it a priority to collect those payments. Prompt follow-ups can make all the difference in recovering your financial position.
Negotiate with Creditors
Talk to the people you owe money to. Many creditors are open to flexible terms, such as instalment plans or extended payment deadlines. This can significantly improve your cash flow and reduce the pressure on your business.
Strengthen Sales and Marketing
Resist the temptation to scale back on sales and marketing. Instead, focus on refining your approach to boost revenue. Streamline efforts to what delivers the best results and drop what doesn’t. Increasing income is one of the most effective ways to improve your company’s financial health.
Seek Professional Advice Early
Don’t navigate company debt management alone. Your accountant can guide you through difficult decisions. You can also consult a Licensed Insolvency Practitioner. At Care Accountancy, we provide confidential and personalised advice to help you find the best course of action.
Common Mistakes Directors Should Avoid
Don’t continue trading if insolvent.
If your company cannot pay its debts and has no clear route to recovery, continuing to trade can worsen the situation. You must prioritise creditor interests and get advice to determine whether you’re trading insolvent.
Don’t walk away from the business.
Avoid abandoning the company. Doing so can lead to serious consequences such as bailiff action or winding-up orders. Stay informed and take control – proactive steps are better than future regret.
Avoid selling an insolvent company.
Selling your business while it’s insolvent may seem like a solution, but it comes with legal and ethical risks. Unscrupulous buyers may misuse the company, leaving you exposed to liability.
Don’t throw good money after bad.
Be cautious about injecting more personal funds, especially when there’s little chance of recovery. That extra money could be lost among existing debts, worsening your financial stress.
Avoid dissolving a company with unpaid debts.
If your company still owes money, you legally cannot dissolve it. HMRC and other bodies often object to such dissolutions, which could lead to costly reinstatement and potential investigation by the Insolvency Service.
Do not make preferential payments.
Treat all creditors fairly. Prioritising one creditor – such as a family member – over others like HMRC can lead to serious penalties, including director disqualification and financial repercussions.
Take Control of Your Financial Future
Managing company debt isn’t easy, but with the right strategy and support, recovery is possible. At Care Accountancy, we help directors face financial challenges with confidence and clarity. Whether you need guidance on cash flow, insolvency, or creditor negotiations, our expert team is here to help.
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