As everything returns to something like normality, it is easy for some to forget how hard the last few years have been for business. According to government statistics, the number of company insolvencies in the UK in 2021, was 14,048.
Surprisingly perhaps, this figure is actually lower than in 2019 which was, of course, pre-pandemic. Nevertheless, it represents a huge number of businesses finding themselves in a state of financial distress for whatever reason.
If your firm is struggling to pay invoices on time, then you may be heading for insolvency. When this happens, it is crucial that professional advice gets taken quickly. But, what do insolvency practitioners do for businesses, and is it important to find a local one?
What is insolvency?
If your business is struggling through a cash flow crisis, or you find yourself in a state of financial distress, then you may be on the verge of being insolvent.
According to the Cambridge Dictionary, insolvency means that you find yourself in a position where you can no longer pay your debts. This term can apply to both enterprises and individuals. Therefore, sole traders, limited companies, and regular folk can all find themselves insolvent.
There are two kinds of insolvency as far as companies are concerned; balance sheet insolvency, and cash flow insolvency.
The latter is fairly straightforward and refers to a company having cash flow concerns, but there are still sizable assets that can be liquidated if necessary.
The former is more worrying, as balance sheet insolvency means that the outstanding debts outreach the company’s hard and liquid assets.
What is an insolvency practitioner?
There are several reasons that solid business plans are needed, and strong financial acumen is critical. However, even the most solid of businesses can at times find themselves suffering from a cash flow issue.
An insolvency practitioner can be approached voluntarily possibly by a company director. Or, they can be court-ordered. They will then act on behalf of the company to either find a way to rescue the business or to see them through the process of liquidation and closure.
What services do insolvency practitioners perform?
An insolvency practitioner’s role can vary from one situation to another. They may be employed to find ways out of debt, or they may have to take on the tasks involved with liquidation. In this instance, they will negotiate with creditors, and then see that assets are disposed of.
Yet, they can carry out many more roles and tasks than this. A few of which can be seen here:
- Liquidations – compulsory and voluntary (MVL and CVL)
- Tax debt
- Pre-pack administration
- Company voluntary arrangements
- Time to pay arrangements
An IP can help a business to find ways to get out of debt and return to profit. Being insolvent doesn’t always mean that a business will be liquidated.
Is it important to find an insolvency practitioner who is locally based?
There would be some benefits from using a local IP rather than one based elsewhere in the country. The insolvency practitioners in Leeds, for example, would be able to provide a better service for those in that area, than perhaps a London-based firm would.
Finding yourself insolvent can be stressful and worrying. This is true for both directors, company owners, and individuals. Being able to speak face to face with a local insolvency practitioner can help to bring some relief back.
If a business is looking to find a way back to profitability, regular meetings to work through options with a local insolvency practitioner would be desirable. It would also be far more practical than talking over the phone or scheduling appointments for long-distance IPs.
How do you locate a nearby insolvency practitioner?
Choosing the right insolvency practitioner could make all the difference to you receiving good, solid advice, saving your business, or seeing it fail completely.
Knowing how to find a reputable insolvency practitioner to help get your business out of debt is essential at this time.
The government operates a web page where you can search for licensed insolvency practitioners by town and city, or by name if you happen to already know of an IP. Going back to the example before, you could also search for insolvency practitioners in Leeds, or London, and Google would return relevant options.
The important part of your search should be to make sure they are fully licensed, and that they have the experience to provide you with the services you require.
Hopefully, you or your business will never find itself in a state of financial distress so bad that you are facing closure. The key thing with insolvency is to get help fast. If you are suffering cash flow problems, it is easy for debts to rack up quickly.
Once debts spiral, it can turn from cash flow insolvency to the much worse, balance sheet insolvency. Finding a licensed, local insolvency practitioner may mean your business returns to health.