7 Signs Your Business may be Insolvent

Do you think there is a chance your business may be insolvent?

Well, there may be some tell-tale signs that your suspicions are correct.

Regardless of the state of your business, you should be constantly overlooking your finances to ensure nothing goes wrong without your knowledge.

In this article our debt agency professionals will discuss some signs and symptoms of an upcoming, or already active, insolvency in your business and what you can do to save your company!

Your Business may be Insolvent because of Negative Cash Flow

Cash flow is a vital area to observe in order to keep your business afloat.

It is the amount of money being transferred in and out of your business.

Positive cash flow is the goal of a business and practically means that the finances of your company are increasing rather than decreasing.

Negative cash flow, however, is the opposite and has the clear potential to send a business into significant debt and ultimately insolvency.

If you are constantly observing your business losing more money than it is gaining, there is a solid chance that insolvency is either coming fast or is already an issue.

However, it is important not to panic. Especially when initially beginning a business, there is a good chance negative cash flow will be an issue from time to time.

In short, negative cash flow is a factor in insolvency, but other factors may temporarily cause it.

Your Business may be Insolvent because of Overdue Taxes

Taxes are another consistent issue involved in the running of a business.

If you are constantly receiving reminders from the Australian Tax Office (ATO) to pay your taxes and, of course, you are unable or were unable to pay the tax, your business may be insolvent.  

Your Business may be Insolvent because of Issues with Creditors

When running a business, there is a good chance you will owe debts and have encounters with various different suppliers or creditors.

A business will, in most circumstances, require materials of some sort to create the product or provide the service it is intending to sell.

If not, you will still require facilities and likely a form of advertising to really get your business out there. Well, of course, all of these things cost money.

Money that will be owed to potential creditors. If you are consistently unable to pay your debts to these individuals, there is a chance your company may be insolvent.

If you have issues with creditors not paying their bills, then submit your debt online.

Your Business may be Insolvent because of Payment Demands

Closely related to the previous point, constantly receiving payment demands may be another symptom of your company’s insolvency. Demand for payment is not necessarily uncommon.

It is likely that in both your personal and professional life you will receive your fair share of payment demands from your creditors.

It is when these demands come in an unmanageable volume, however, that they become an issue.

here are various forms of payment demand, but there are two main forms that you should be looking out for.

A statutory demand is a payment demand that will result in legal action if the payment remains unpaid.

I do not need to explain how legal action can be a threat to yourself and your business.

Another form you should be concerned about is consistent, especially daily, demands for payment from creditors. 

If you have issues with creditors not paying their bills, then submit your debt online.

A sign of Insolvency is Unpaid Superannuation

Are you finding yourself unable to pay your employees their rightful superannuation payments?

This is another sign that your business may be or may be becoming insolvent, and an early one at that.

Furthermore, not paying employees their superannuation can land you in some serious legal and financial strife.

If you are failing to report and pay your employees' superannuation on time, you as the business director may be held personally liable.

Personal liability may cause serious issues in your personal finances and life.

If you are legitimately unable to personally pay the superannuation, you will be required to lodge a superannuation guarantee charge statement with the ATO.

Extreme Staff Turnover is a Sign of Insolvency

Is your business constantly replacing staff due to a lack of employees or individuals quitting or being fired?

Although not as obvious as some of the previous signs, this may also be a symptom of insolvency.

Employee satisfaction rates are generally a clear indicator of the health of your business. Insolvency, or near insolvency, may lead to stressful work conditions, poor treatment of staff, and/or inability to efficiently pay staff their owed and agreed upon wage.

Any of these factors may contribute to staff finding themselves unwilling to continue to work for your company or performing poorly at their job and getting themselves fired.

Furthermore, if you are finding yourself needing to constantly let go of staff for the purpose of saving money on wages, you may also be barrelling toward insolvency. 

Consistent Denying of Business Finances

When applying for loans or other financial aspects, you will likely be searching for the best offer on the market.

Well, did you know that banks or other creditors are less likely to offer obviously struggling businesses the better offers they provide?

Lenders want the confidence that their money will be paid back, and they will not find themselves needing to constantly follow up on overdue payments.

For this reason, it is unlikely that they will offer struggling businesses the lower interest rates that they may offer other clients.

A step further, if your business is being outright denied funding from creditors or being cut off by suppliers, it is likely that your business is either insolvent or extremely close to it. 

What Should I Do?

So, do you think your business is insolvent or edging on it? Stay calm!

There are a few options you have before deciding, or being forced, to wind up your company.

Act Fast if Your Business is Insolvent

As soon as you realise that your business may be insolvent, you must spring into action.

As they say in business, time is money! If you wait too long before acting, you may personally experience some serious consequences.

Creditors have the right to enforce liquidation on an insolvent company without the consent of the owner or director.

Once this happens, you may be personally liable for certain responsibilities or decisions.

Do not hesitate for even a minute as that one minute may be the difference between the life and death of your business. Act now!

Seek Help if your Business may be Insolvent

Before making any concrete decisions as to what you wish to do with your now insolvent business you must seek professional assistance.

Many business owners are not aware that they do indeed have options other than liquidation when their company is insolvent.

There are individuals who specialise in getting businesses back in the right direction once they have been affected by insolvency!

Increase cash flow and avoid insolvency with Advance Debt Collection