What To Do If Your Business Or Company Is In Financial Trouble

A company can find itself in financial trouble for all sorts of reasons.

• A big customer not paying your invoice
• A sudden change in the market place
• A legal dispute
• Financial controls failing to spot losses
• A rogue director/manager spending money where they shouldn’t
• Increased input costs
• Employee problems

Warning signs that your company is in financial trouble

If your business exhibits multiple warning signs, it may be under financial pressure, at risk, or even insolvent. Key warning signs are:

Banking Issues

• Constantly at the overdraft limit.
• Bank refusing loans, overdrafts, or requiring personal guarantees.
• Increased demands for financial information or investigations.

Reporting and Compliance Problems

• Late filings of accounts and returns at Companies House, leading to penalties.

Creditor-Related Problems

• Struggling with cash flow, making it hard to pay suppliers.
• Credit refusals or extended payment terms failing.
• Frequent legal actions, red warning letters, or bailiff visits.

Debtor Concerns

• Customers consistently delay payments.
• Uncertainty about total outstanding debt.
• Heavy reliance on one or two major customers.

Factoring Issues

• Factoring company reducing advances or disallowing invoices.
• High costs associated with factoring services.

Management and Operational Red Flags

• Poor leadership with no delegation or planning.
• Lack of clear financial and business performance data.
• High director salaries despite business struggles.
• Ignoring professional advice.

HMRC (Tax) Problems

• Late PAYE and VAT payments.
• HMRC enforcement actions, penalties, or payment arrangements failing.

Personal and Emotional Stress

• Dreading work, avoiding calls, unopened mail.
• Sleep problems, workplace loneliness, and conflicts with colleagues or family.

Financial Management Failures

• Lack of proper financial records, inaccurate data, or ignored reports.
• High wastage, product returns, and unresolved debtor disputes.

Workforce and Financial Troubles

• High staff turnover, low morale, and workplace conflicts.
• Constantly refinancing assets or using personal funds to keep the business afloat.

If multiple signs apply to your business, urgent action is needed to avoid insolvency.

It is possible that you’re struggling to meet debt payments and cash flow is suffering.  However, don’t panic! There are a number of options available to help turnaround the business if it is in financial trouble.

Cut costs to improve cash flow

Make sure you know exactly what is being spent every day. Keep a close eye on accounts and cut out non-essential costs. You’d be surprised by how many things you don’t need.

See here for more tips on cutting costs.

Debtor collection

Collecting late payments is a vital part of the business but it can also be time-consuming. Ensure you have a suitable credit policy and always have agreements in writing. Verbal correspondence will make chasing debtors more difficult.

Critically examine all current projects and quotes

In order to do this you will need have good financial controls and data.  Maybe appoint a part time accountant, advisor to sanity check the situation.

What actions should I take to save the business

Plan A or time to pay

If creditors are threatening legal actions, it’s worth looking at what we call, Plan A. This is an informal deal with creditors as a way to pay back debt over a relatively short time period. We may be able to arrange a Time To Pay (TTP) deal with HMRC on your behalf if you’ve fallen behind on VAT and PAYE payments.

Company Voluntary Arrangement (CVA)

Similar to Plan A, a CVA is a formal deal made with creditors to ensure debt is repaid over a set time-frame. The arrangement protects your company from legal actions and is a powerful restructuring and refinancing tool. Unlike a Time To Pay deal, up to 60% of unsecured debt can be written off. For a detailed CVA guide, click here.

Pre-pack Administration

If the company is under threat from an aggressive creditor, selling the company in a pre-pack administration deal to a third party may be the best option. This ultimately gets rid of debt and allows the business to continue. It is possible to sell the business back to its current directors/shareholders but this can be tricky as there are various regulatory hoops that need to be jumped through!  It can end those sleepless nights quickly!

Refinance

Sometimes it is a poor relation with your lender that can cause issues.  Maybe they consider your business riskier than it actually is so they are charging a high rate of interest or in the case of a factoring company they are not letting you draw down enough on invoices.  If this is the case it is always worth talking to us as we do know lenders that are prepared to take on struggling businesses.  They do often ask for a personal guarantee so bear that in mind.

What If I am a soletrader?

If you are not incorporated and are running a business as a soletrader, then the risks are higher if the business is in trouble as you will be personally liable.  Instead of a CVA you may need to propose an IVA and if this is not affordable then you may go bankrupt.  See our help for soletraders page

How can we help worried business leaders?

First of all we offer a free meeting to company directors/business leaders which can take 2-3 hours. We look at the current situation and advise, in a 15 page written report (delivered within 48 hours), what the options are available and our advice.  Any work that we proposing doing is fully costed and put in writing at this stage.