As a company director or owner, it is important that you keep an eye out for signs that your company may be insolvent or likely to become insolvent. This will prevent your company from trading whilst insolvent which can bear serious consequences.
Here are four signs that your business is headed towards company insolvency:
- Ongoing losses
If you find that your business is constantly losing more money than it is making, then that is a sure sign of company insolvency. Without making a profit, a business cannot survive in the long run.
- Bookkeeping records not updated
Another sign of company insolvency is poor financial records. One of the first signs that a company is struggling is when records are not kept up-to-date because the focus will most likely be on other tasks as opposed to bookkeeping. The Corporations Act states that this creates a statutory presumption of company insolvency.
- Delayed superannuation contributions
One of the warning signs is delayed superannuation contributions. One of the reasons why struggling businesses delay superannuation payments is because these fees are only paid every few months so it is less noticeable if they are late. Not only is this an indicator of company insolvency but it also can cause a director to become personally liable for these payments.
- COD Terms
If your suppliers or vendors suddenly implement cash-on-delivery (COD) terms on your arrangements then that is a signal of company insolvency. It shows that you had not been able to make payments by the agreed terms previously and this has raised concerns that you will not be able to pay for your products and or services on time.
If you have or are experiencing any of these four signs of company insolvency, then take action immediately. Delaying taking the appropriate steps to help your company can bear serious consequences for your business and for you as the director. Seek professional help from a reputable company that can assess your situation for you and help you make the best choice such as Australian Company Liquidations. ACL offers a free consultation to help directors who are facing company insolvency. Call us on our 24/7 toll-free hotline to speak to one of our fully licensed liquidation practitioners now.