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5 warning signs that your company is at risk of insolvency: how to prevent the worst

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Insolvency can lead to bankruptcy. Fortunately, the worst can be prevented! The key is to identify the telltale signs as early as possible. This way, you can take the necessary measures in good time. Discover 5 warning signs of insolvency.

What are the 5 signs that your company is at risk of insolvency?

Reduced liquidity

Cash flow problems are the first warning sign. Your company can no longer cover its current expenses. What’s more, it can no longer meet its short-term debts. Take action before the situation gets worse!

Excessive debt

The increase in debt is also a worrying sign. This indicates that the company is seriously short of cash. It must rely on credit to finance its activities. The problem is all the more alarming if income remains stable or declines.

Lower profit margins

The persistent decline in sales is also a warning sign of insolvency risk. This results in lower revenues. This means lower profit margins. The company will then gradually run out of cash and go into debt.

Late payments

Do you always wait until the last minute to pay your suppliers? Worse still, are you still paying your suppliers late these days? Are you unable to pay your wages on time? In this case, take corrective action before it’s too late. Professionals in the field can help you find the right solution.

Budget restrictions

Are you forced to reduce your company’s working capital to stay on course? Do you have to lay off employees? This is also a bad sign! You need to act quickly to prevent insolvency.

What are the main causes of these poor financial situations?

There are many possible causes of insolvency. Here are some of the most common:

  • Poor financial management
  • Supplier rate increases
  • New competition on the market
  • Operating costs too high
  • Late payment by customers
  • Decrease in sales

How to prevent insolvency?

Focus on good management right from the start of the business to prevent difficult situations. Set a strict budget. Study the market carefully. Adopt a sound sales strategy. Hire qualified professionals for every department. What’s more, you can still avoid insolvency if any of the above signs have already appeared. Solutions vary depending on the problem. Here are a few options:

  • Drawing up a recovery plan
  • A proposal to reduce the burden of debt
  • Collection of overdue payments from customers
  • Negotiate more advantageous payment terms
  • Optimizing inventory management

To conclude

At Demers Beaulne Inc., we offer customized solutions to turn your business around. We will then support you in their realization. Contact us today to find out more about our services!

À lire par la suite

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