Insolvency has been defined as the state of not being able to fulfill one’s obligations as they mature or become due. It has to be acted upon as quickly as possible as it can result to worse consequences such as bankruptcy. We all know for a fact that no entrepreneur would wish that to befall upon their beloved businesses and so AABRS.COM is here to help you avoid that with the following warning signs to insolvency.
Daily Payment Demands – When creditors call up your office on a daily basis asking for payments, this could be a sign of a looming insolvency. They wouldn’t be pestering by the telephone endlessly every single day unless you’ve repeatedly missed payments.
Delayed or Missed Tax Liabilities – There is no valid reason as to why a company will purposefully delay or miss their tax payments. Human error is possible but is rarely the case. If this happens, it could be that the company is short of liquid funds.
Dividend Holidays – Dividends are profits paid pro rata to stockholders. A healthy and profitable company has payouts more often than those that don’t. Dividend holidays on the other hand pertain to the total absence of any payout.
Legal Threats – When your creditors send out threats of a winding up petition at court, this could be a result of repeatedly missing out on your obligations.
Long Outstanding Payables – The longer and more aged your payables are, the bigger your interests and penalties could be. It can also be the sign of inadequacy when it comes to repaying your obligations as they mature.
Poor Cash Flow – Cash outflows outweighing inflows is one of the major signs of insolvency. An entity will eventually drain out if it spends more than what it acquires.
Refusal of New Credit Application – Creditors and financial providers look into solvency and financial status of fund applications. If you are denied of one then you must check into your financial statements for yourself.
Refusal to Extend Credit Deadlines – Many creditors are willing to give extensions to their loyal and trusted patrons. This only ends when the patron has repeatedly breached payment schedules. So the next time that you ask for an extension, you will most likely be denied of it.
Stock Order Problems – Additionally, when suppliers and vendors decline your purchase on credit, this could mean that the relationship between the two has been tarnished in some way. One of which is missed payments due to fund shortages.
Trade Insurance – Lastly, AABRS.COM reminds entities that should your regular suppliers ask you for a trade insurance which they haven’t asked before, it can be a sign of skepticism as to your ability to fulfill the obligation timely.