Bankruptcy is something every company wants to avoid,and that is shown as one of the main concerns of any business in times of crisis, as in which we are currently has caused the coronavirus, which has caused the bankruptcy of thousands of businesses in our country.
When we talk about bankruptcy, we are referring to a situation in which the company cannot afford its payments for a long period of time,as these outweigh the benefits and resources available. A situation that becomes unsustainable and impossible to solve, which ends up causing the dissolution of the company.
Bankruptcy is usually not something that arises overnight, but is the result of a long business crisis from which it has not been possible to get out, among other things, because it has not been acted on time.
That’s why today at AYCE Laborytax we tell you the main symptoms that will allow you to detect a bankruptcy before it’s too late, how to act on this situation, and the consequences for your company of going bankrupt.
Symptoms to detect and anticipate a business bankruptcy
Strong drop in sales
The main symptom of a corporate bankruptcy is a sharp drop in sales over a long period of time. “A long period of time” should be emphasized, as all companies are going through times when sales are reduced, but when this becomes commonplace, it is a serious problem that decisions need to be made to try to fix it as soon as possible.
Expenses outweigh income
Following the line above, another symptom that evidences a bankruptcy is that the expenses are higher thanthe income, something unsustainable for any company, since it will not be able to meet all its financial obligations.
This will lead to a lack of liquidity,which will cause the company to accumulate long-term debts that, if this situation is not resolved, will increase to become unsustainable.
There are no cash savings left
If after years when you had a major economic mattress that allowed you to face with guarantees any small crisis, after a while, there are no cash savings left, it is a clear symptom that your company is at risk of bankruptcy.
Savings are the cornerstone of any business, allowing you to cope with complicated economic moments. Therefore, when a company does not have savings, it is totally at risk, and will have no guarantees to get ahead at a difficult time.
A company’s bad reputation is one of the pre-crisis steps. Whether because you have lowered the quality, because new competitors have appeared more attractive or because the product or service you offer has lowered demand, customer satisfaction is critical for any company.
That’s why a reputational crisis could drive away your regulars and prevent attracting new ones, leading to a drop in sales that could lead to bankruptcy.
Your company has entered a creditor contest
last If your company has entered a creditor contest, it means it’s on the brinkof bankruptcy, as the creditor contest is an instrument that tries to solve an extraordinary economic crisis situation, when a company doesn’t have enough liquidity to meet its obligations.
Although many companies have continued their activity and gone afloat after entering creditor competition, creditors’ competition is usually the pre-bankruptcy step.
How to act to avoid bankruptcy?
If your company is in crisis and you want to avoid bankruptcy at all costs, a feasibility plan will
be your bestally, through which you can carry out a restructuring of the company that allows you to make it more competitive and efficient in the market, and most importantly, maintain activity.
Although it will depend on the nature and situation in which each company is located, a feasibility plan aims to reduce spending, increase sales and refinance debt, and for this it sets the guidelines to reduce delinquency, incorporate new professionals that allow to face the crisis situation in the best conditions, as well as detect the different errors and weaknesses of the company, to try to turn them into opportunities.
Therefore, the feasibility plan is a key mechanism to get out of the crisis and avoid bankruptcy,and it may be the difference between going forward or having to dissolve the company.
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