With everything returning to something like normality, it’s easy for some to forget just how tough the past few years have been for business. According to government statistics, the number of business insolvencies in the UK in 2021 was 14,048.
Surprisingly perhaps, this figure is actually lower than 2019 which was, of course, pre-pandemic. Nevertheless, this represents a large number of companies finding themselves in a state of financial distress for whatever reason.
If your business is struggling to pay its bills on time, you may be heading into insolvency. When this happens, it is crucial that professional advice is 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 going through a cash flow crisis or you find yourself in a state of financial distress, you may be on the verge of insolvency.
According to the Cambridge Dictionary, insolvency means that you find yourself in a situation where you can no longer pay your debts. This term can apply to both businesses and individuals. As a result, individual traders, LLCs, and ordinary people can all find themselves insolvent.
There are two types of insolvency when it comes to businesses; balance sheet insolvency and cash flow insolvency.
The latter is quite simple and refers to a company having cash flow problems, but there are still significant assets that can be liquidated if necessary.
The first is more worrisome, as balance sheet insolvency means that outstanding debts exceed the company’s physical and liquid assets.
What is an Insolvency Practitioner?
There are many reasons why strong business plans are needed, and a keen sense of finance is essential. However, even the strongest companies can sometimes find themselves with a cash flow problem.
An insolvency practitioner can be approached voluntarily possibly by a business manager. Or, they can be court-ordered. They will then act on behalf of the business either to find a way to save the business or to accompany them through the liquidation and closure process.
What services do insolvency practitioners provide?
The role of an insolvency practitioner may vary from situation to situation. They may be employed to find ways to get out of debt, or they may have to take on liquidation-related duties. In this case, they will negotiate with the creditors and then ensure that the assets are disposed of.
Yet they can perform many more roles and tasks than that. A few of them can be seen here:
- Liquidations – mandatory and voluntary (MVL and CVL)
- Tax debt
- Pre-pack administration
- Company Voluntary Arrangements
- Payment period
Intellectual property can help a company find ways to deleverage and return to profit. Being insolvent does not always mean that a company will be liquidated.
Is it important to find a locally based insolvency practitioner?
There would be certain advantages to using a local IP address rather than one based elsewhere in the country. The insolvency practitioners in Leedsfor example, would be able to provide a better service to people in that area than perhaps a London-based company.
Finding yourself insolvent can be stressful and worrying. This is true for administrators, business owners and individuals. Being able to speak face to face with a local insolvency practitioner can help bring some relief.
If a business is looking to find a path back to profitability, regular meetings to review options with a local insolvency practitioner would be advisable. It would also be much more convenient than talking on the phone or scheduling appointments for long distance IPs.
How do I locate an insolvency practitioner near me?
Choosing the right insolvency practitioner could make all the difference in whether you receive good solid advice, whether you save your business or see it fail completely.
Knowledge how to find a reputable insolvency practitioner helping to deleverage your business is critical right now.
The government operates a webpage where you can search for licensed insolvency practitioners by city and town, or by name if you already know an IP address. Going back to the previous example, you can also search for insolvency practitioners in Leeds or London, and Google will return relevant options.
The important part of your research should be to make sure they are fully licensed and have the experience to provide you with the services you need.
Hopefully, you or your business will never find yourself in such dire financial straits that you face closure. The main thing with insolvency is to get help quickly. If you’re having cash flow problems, it’s easy for debt to pile up quickly.
Once debts skyrocket, they can go from cash flow insolvency to much worse balance sheet insolvency. Finding a local licensed insolvency practitioner can mean your business is back on track.