It can be daunting to have your business go into debt, but there are steps you can take to manage your financial situation as smoothly as possible.
Take stock of your situation
The first thing to do if you’re in debt is to take stock of the money owed to you and the money your company owes, and to fully assess your financial situation. From here, you can prioritise your debt and begin to identify what can be paid straight away, what can be paid later and when you need to request a payment plan with your creditors. After assessing what is owed to the company, you can begin to contact late or non-paying customers to chase payments.
Speak to companies you owe money to
Explaining your circumstances to your creditors is a good way to prevent any further late penalties or calls from debt collectors, and it gives you the opportunity to ask if any hardship provisions are available. It may also be possible to extend the due date of some of the payments or to set up a payment plan. Bear in mind that if your debt has been passed on to a debt collector, there are certain laws that have to be complied with so it’s worth researching what your rights and responsibilities are.
Liquidate or ‘wind up’ your company
Another option is to choose administration or liquidation for your limited company, which means using the company’s assets to pay off any outstanding debts before it’s closed down, and the company will cease doing business and employing staff. Any money that’s left once the debts have been paid off goes to shareholders. Remember that you’ll also need a validation order to access the company bank account.