Advice for sole traders and directors in Northern Ireland struggling with business cash flow problems
Whether you’ve set up in business as a sole trader or a company director, retaining control of your cash flow is crucial to success. Lack of cash is one of the main causes of business failure, even for those profitable in the past.
The problem is that, once financial decline begins it can be difficult to get back on track, so how can you take control of this vital element of your business?
Sole traders carry a heavy burden in terms of personal liability – if your business goes under, you’re personally liable for its debts. So although you cannot plan for every outcome, there are a number of ways to protect yourself from the threat of insolvency.
Understand the mechanics of your business
It’s the underlying systems and procedures used every day that will help you stay in control. Regular invoicing and payment collection are just two areas that require efficient processes to be in place if you’re to maximise cash availability. If you understand why poor credit control exposes your business to the risk of bad debt, for example, it’s less likely to affect your business to the point of serious financial decline.
Seek professional insolvency advice
Licensed insolvency practitioners (IPs) offer in-depth business knowledge and industry experience, and often have contacts with alternative lenders offering flexible finance deals. It’s possible to seek professional insolvency advice at any stage of business development, not only in cases of dire need.
Start-up businesses and established organisations alike can benefit greatly from the commercial acumen and industry experience offered by a licensed IP, and ensure the decisions made are based on professional guidance.
Forecast your cash flow regularly
Cash flow forecasts offer valuable insight into your cash needs over the coming months. They can be used to avoid shortfalls and identify cash surpluses, allowing you to plan a growth strategy or simply remain confident that you can pay the bills.
When you can’t pay your bills as they fall due, your business may be insolvent. This doesn’t mean that it has to close, however. With so many effective insolvency procedures available to Northern Ireland businesses, you may be able to get back on track with the guidance of a licensed insolvency practitioner.
Limited company directors
In the majority of circumstances, you’ll benefit from limited liability in the event of the company’s insolvency as a company director. There are some instances when you do become liable for company debts, however – in the face of misconduct, for example, or wrongful trading.
Another common example is if you borrow money from your own company. When the business enters insolvency you’ll become liable to repay this amount from your personal funds, regardless of whether you can afford to. In some cases, this can result in personal bankruptcy alongside a company’s insolvency.
How we can help
Northern Ireland Debt Solutions can arrange a free same-day meeting to discuss your situation. Our licensed insolvency practitioners will ensure you understand all the options available, and guide you towards the best solution.