Payments, Planning & Positioning - staying solvent in today’s climate by Tom Esler, MFG Solicitors
Author: Tom Esler
Last Updated: 4/15/2011 3:42:09 PM
Summary
Put simply, a business is insolvent if there are no assets to cover its liabilities. Today’s uncertain economic climate makes it essential for businesses to ensure meticulous due diligence and forward planning.
Article
Here are five steps your business can take to help stay on the
safe side of the insolvency line:
• Cash flow: There are several measures you can take to
keep cash flowing into your business. Invoice promptly, avoid
overtrading, recover debts and maintain your inventory.
• Prevent late payment: Timely payment is good business
practice. Asking for payment in advance is advisable whilst
consider offering incentives to encourage prompt payment.
• Terms & Conditions: It is essential customers are
made aware of your terms and conditions. Send your T&Cs with
invoices and ask customers to acknowledge their understanding.
• Reduce the risk of non-payment: Credit terms need to be
clear. Make invoices eye-catching and include your terms, unit
costs and payment due date. Collection strategies can be overlooked
so issue timely reminders and track progress. Don't be scared to
credit check potential customers.
• Negotiate with creditors: Any creditor owed more than
£750 can ask a court to wind up your business. So do not
ignore your creditors - co-operate with them.
Running closely alongside insolvency issues are Personal
Guarantees. Given by directors, these are a feature of the
commercial world and must be treated cautiously. In short, this is
a contract whereby a director promises to fulfil their company's
obligations to the creditor if the company fails.
There are numerous points to consider; your rights as a
guarantor, your obligations, liabilities, indemnities and consent
to name just a few. The list is endless so it is prudent to take
professional advice when dealing with these complex contracts.
A growing number of businesses across the Midlands are breathing
more freely as we feel our way through a fragile economic recovery
- however the need to plan, thus avoiding insolvency and personal
guarantee pitfalls is vital. Perhaps more vital than ever.
The Author
Tom Esler is a commercial litigation partner at MFG Solicitors.
He has vast experience in commercial dispute resolution, mediation
and risk management. Tom represents parties in a wide range of
disputes from straightforward contractual matters through to
complex manufacturing, warranty and shareholder disputes. He
primarily acts for shareholders and directors of owner-managed
businesses advising on all areas of company law, ecommerce,
insolvency and intellectual property.
For advice relating to insolvency and personal guarantees,
please contact Tom Esler at MFG Solicitors on 0845 55 55 321 or
email: tom.esler@mfgsolicitors.com