Is My Company Solvent?

With the hustle and bustle of running a business, it can be difficult to get a handle on how well you are doing. Asking yourself “Is my company solvent?” can be a highly efficient way of avoiding financial difficulties later down the line. After all, insolvency is one of the biggest issues that all companies face. It goes beyond a temporary issue about paying a certain bill because you don’t have liquidity for one reason or another.

If you want to check that your company is solvent there are some simple signs to look out for:

  • Are you on good terms with your bank, for instance. Are they still giving you loans or extending credit? A sure sign that you are having problems is when your bank starts putting hurdles in the way such as asking for guarantors when arranging new loans.
  • If you are paying your creditors easily and on time, it’s usually an indication that your company finances are in a healthy state.
  • On the other hand, if creditors are starting to take you to court or are suddenly unwilling to extend terms, there may well be a problem with your solvency.
  • The other main indicator of solvency is that you have more assets than liabilities – in other words, if the worse came to the worse, you would be able to sell off your assets and comfortably pay your bills. If not, solvency is an issue.

Of course, as a director, you should be well versed in the finances of your company but it’s surprising how many are not. If there is a problem with solvency, it’s not something that can be easily ignore. You need to address the issue and find a solution.

Talking to an insolvency team can help you put in the measures to rescue your company and make it solvent. It can also prepare you for action if things do get worse.

Contact our team of experts today to find out more. 

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