Contact our debt recovery specialists. Call 0141 331 2332

Could Your Debtor Become Insolvent? Know the Warning Signs

29 October 2019 Written by Yuill & Kyle Solicitors Category: Blog

Facing debt and cash flow problems is challenging for any business. However, where a debtor, supplier or client becomes insolvent, this could cause you great financial difficulty. In this post, we provide an overview of the signs that indicate a business may be approaching insolvency and set out the steps you can take to mitigate your losses. 

What are the early-stage warning signs of insolvency?

Being able to spot the early signs of insolvency in those you are contracting with can protect your cash flow and even save your business. Some of the indicators you should look out for include: 

  • Issues with cash flow
  • Attempting to negotiate payment terms, such as dates or a credit limit
  • Difficulty paying employees
  • Non-payment of invoices 
  • Late filing of their annual return or accounts with Companies House
  • Official announcements to shareholders about the financial performance of the company
  • Employees being removed from projects unexpectedly or work being suspended without explanation 
  • Court judgements, CCJ’s or High Court Writs being issued against them or other creditors issuing winding-up petitions 

You should also take note of persistent rumours within their industry about the financial state of the company. Rumours alone should not be the basis of believing a business is insolvent but where they are supported by the indicators above, it may be time to take action. 

What action can I take to protect my business from debtor insolvency? 

  • Always obtain references or run credit checks on parties you are contracting with. This can help you avoid working with businesses that may already be approaching insolvency. 
  • Maintain good communication with debtors. Making arrangements with debtors can help them to keep up with payments. However, if they do enter insolvency, you can work with the Insolvency Practitioner to find a solution that works for both parties.
  • Include a retention of title clause where relevant. This will allow you to recover any goods or materials before full payment is made for them. 
  • Keep good records. Maintaining proper records demonstrating the losses arising from the insolvency can help safeguard a party’s interests if insolvency does occur.
  • Include a suspension or termination clause in your contracts. This may allow you to suspend or terminate the agreement where the other party becomes insolvent. 

It is essential to be prepared for debtor insolvency. If you are having difficulty recovering debt from a failing business, we can help. Get in contact with our expert debt recovery team today. 

Contact Yuill + Kyle Debt Recovery Specialists in Glasgow, Edinburgh and Dundee, Scotland

We can work with your debtors to find a practical solution that works for all parties, so if you need advice on credit control, debt collection or enforcement, contact our team today. We will do all that we can to recover as much as possible. To discuss your options, 0141 331 2332 or complete our online enquiry form and we will get back to you. 

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