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Although the name “Insolvency Practitioner” suggests that the profession is for times when companies are seriously looking at declaring insolvency, in actual fact, Insolvency Practitioners are, fundamentally, people who are skilled at steering companies through choppy financial waters.  They will look to bring the company ship into a safe harbour if at all possible and if not they will do all the can to ensure that directors and employees make an orderly exit into the lifeboats rather than just finding themselves being taken down with the ship and having to sink or swim.  Given that it’s usually easiest to solve problems if you can catch them early, it can actually be best to seek the guidance of an insolvency practitioner at the first signs of financial difficulties, rather than waiting for clear indications that your company is in trouble.

Stop shock waves from turning into tidal waves

Effective cash-flow management is crucial to the success of any business and particularly so with smaller ones which do not have the financial reserves of their larger counterparts.  While there are many strategies can be employed to keep cash flowing smoothly from one day (and month and quarter) to the next, for example, leasing equipment rather than buying it outright, the fact still remains that smaller companies tend to be more vulnerable to shocks such as losing customers or late payment by customers.  In either of these situations, it could be a good idea to call in an IP for suggestions on how best to proceed, even if you’re fairly confident you can still cope.  Your IP can give your business a general health check and make suggestions for improvement (or, in a worst-case scenario alert you to the dangers you face and your options for dealing with them).  They may be able to suggest options you might not have realised existed or thought were right for your company, for example, they might suggest a move towards invoice factoring to resolve issues with late payments (or just suggest ways you could make your invoicing and payment processes more efficient).

When the going does get tough, don’t ignore reality

There’s an old joke that a lifeguard was passing a river when he saw someone being swept away, so he jumped in and saved them.  No sooner had he saved the first person than he saw a second, so he jumped in and saved them.  Then he saved a third, a fourth and a fifth, as he was doing so, a person walked by, looked and walked on.  “Why don’t you stop and help?” shouted the frustrated lifeguard, who could see a sixth person floating towards them.  “Because I’m going to see what’s making them all fall in.” came the response.  In other words, it can be so easy to get caught up in everyday firefighting that you can’t find the time to look for the source of the fire, especially if you don’t actually really want to think about the fact that there is a fire.  An IP can be your passer by, who can look at a difficult situation with a clear head and make suggestions as to what to do about it.  In all honesty, you may not like those suggestions, but you will need to be realistic about the fact that ignoring the situation is not an option either, especially since it can open you to the risk of trading while insolvent, which is a criminal offence.  Even if it does not, you will presumably want to avoid any possibility of directors being held personally liable for a company’s debts, which can happen even in limited companies, unless correct procedures are strictly followed.

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