Running a small business is not that easy then it may look from the surface. Being the owner, you have to take care of countless things all alone, and ignoring any one of them can have an adverse effect on your business. Among all the things that you will be dealing with, finance is undoubtedly the most challenging task as you have to handle all the expenses with limited money and a little delay in the payment or losing a few of the precious customers is enough to pull your company towards insolvency. 


The sad part is that most of the businessmen don’t understand or most probably don’t have much idea on how to tackle these situations in a better way. If effective measures are taken from the very start, things can get better before anything wrong happens. In this blog, we have prepared a list of common signs that your business is underperforming and could fall into the trap of insolvency so that you can take serious action as early as possible. So, let us get started. 


Common signs that your business is on the verge of insolvency 


The amount of credit that you owe is piling up 


The first and foremost sign that your business is struggling financially is when there is a rapid increase in the delayed payments and demand from your creditors. Well, a financial crisis is something that all businesses face at one point, but if you are under the burden of too many debts, then it’s high time that you take some effective steps to counterattack this threat. The best option here would be to go for installment loans in the UK and use the fund to pay off your debts. The good thing is that you get the golden opportunity to clear a major chunk of your debts and also get the liberty to pay the loan in monthly installments which will be just like killing two birds with one stone. 


You are constantly surrounded by problems


If instead of dedicating your precious time to the development of your business, you are continuously solving the problem both internal and external, there is something major going with your business that needs attention. There could be an incompatibility issue between the employees or any disorientation in the management or could be the cause of wrong business decisions. Whatever the issues may be, the main point is to find them and resolve them as soon as possible before things turn out to be really bad. Being a business owner, you should always think about improving the productivity of your employees and maintaining the environment of the workplace. 


Relying too much on credit and overdraft 


Yes, it is true that during the early stage of business, you won’t be able to manage the running cost of the business all alone and you would definitely need financial assistance. However, if you are relying too much on credits and overdraft for your business finance, then there is definitely something wrong with your business policy and strategy and you need to address the problems as early as possible before things slip away from your hands. You need to come up with a better strategy that can help you improve your business sales and generate more revenues which you can use further to fund your business development. 


Unable to  make payroll 


Lastly, another great sign that your business is in a great danger zone is when you are finding it hard to even pay your employees. This is a very strong indicator that insolvency is reaching your business soon and you need to figure out the way to fix this issue. Well, the only reason behind this is that you don’t have enough funds in your business account to pay for your working staff. Another great disadvantage of this is that chances are very slight that the employees will be staying for long in the company after this as in the end; they have their own personal expenses to take care of. 


If you really want your business to thrive, you cannot simply bury your head in the sand whenever a problem arises. Therefore, if you witness any of the signs mentioned above, then you know what you need to do further. 


Investors are not interested in your business anymore


Be it a startup or a large-scale enterprise, all businesses need funding for their development. The funding is mostly provided by the investors who make their decisions based on whether the company has the potential to run in the future or not. So, if you are barely making any revenues from your business and are already under the burden of too many debts, then there will be a very thin chance that investors will show any interest in your business from now on, and with the investors gone, it managing your business will be nearly impossible. 


If you really want your business to thrive, you cannot simply bury your head in the sand whenever a problem arises. Therefore, if you witness any of the signs mentioned above, then you know what you need to do further. 


Author’s Bio: Alison Cooper is a fintech writer with an overall experience of 10 years in the industry. Currently, she is working for Virgin Bucks where she dedicates her time in creating unique and informational content related to finance.

Early Signs That Your Business Is Heading Towards Insolvency 

24 September 2018
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