Insolvencies On The Rise? – How Advisory Can Help

Insolvency is unsurprisingly on the rise. The latest figures from the UK Insolvency Service, show businesses failing at the quickest rate since the 2009 financial crisis. It makes for pretty grim yet expected reading. This is especially so with the cost of living crisis and rising interest rates affecting the majority of UK taxpayers.

There were 22,109 underlying corporate insolvencies in 2022, an increase of 57% from 2021. This equates to one in every 202 active companies, a rate of 49.5 per 10,000 active companies. Already in 2023 alone, it’s reported that approximately 1671 companies have entered administration or liquidated insolvency in January. This huge spike over the past 12 months can be heavily attributed to the current economic situation. However, a large cause of the downturn is down to the lack of advisory services used by businesses in trouble.

We take a look at the implications of talking to an advisor before it’s too late, and the benefits this can bring to you and your business.

How Can Advisory Services Help Stave Off Insolvency?

Advisory services in businesses can help companies avoid insolvency by providing them with the necessary support and guidance to navigate financial challenges and make informed decisions. Some of the ways advisory services can help companies avoid insolvency include:

Financial analysis and planning

Advisory services can provide a comprehensive analysis of a company’s financial situation, including its income statement, balance sheet, and cashflow. Based on this analysis, advisors can develop a plan to improve the company’s financial health. This includes recommendations for cost-cutting measures, revenue-generating opportunities, and debt management strategies.

Risk management

Advisory services can help companies identify and assess the risks that may lead to insolvency. They can provide guidance on how to mitigate these risks through appropriate risk management strategies. For example, diversifying revenue streams or improving internal controls. This enables forecasting, as well as scenario planning, ensuring the company is prepared for anything which may arise. All of this thereby increases a business’s strong foundations.

Debt restructuring

Advisory services can assist companies in negotiating with creditors to restructure their debt so it’s manageable and sustainable. This can include negotiating loan terms, interest rates, and repayment schedules that are more favourable for the company. By doing this, it devises a set plan of action which appeases both the business and the creditor. This provides a future pathway whereby the business can begin to plan growth sufficiently.

Cashflow management

Advisory services can help companies better manage their cash flow, which is often the root cause of insolvency. They can provide guidance on how to increase cash inflows and reduce outflows. This can include through effective accounts receivable and accounts payable management. Once identified and a course of action taken, a solid cashflow structure will be adhered to. This protects against any cashflow problems which may persist in the future.

In summary, advisory services can provide valuable support and guidance to help companies avoid insolvency by improving their financial health, mitigating risks, restructuring debt, and managing cashflow more effectively.

How Can Nordens Help Avoid Insolvency?

Every business, no matter how large or small, has to make the correct choices. They also need to figure out how to effectively direct the business and make the correct decisions. Because of our precision and intelligence, you can always obtain an exact estimation of your company’s status or health, as well as whether it’s heading in a favourable or bad manner. This is often used to advise individuals in management and directing responsibilities on how to effectively strategize for development and profit.

Our consultants will provide you with the technique and expertise to develop your strategic plans, providing guidance, teaching you valuable skills and doing our very best to ensure your business achieves its goals. We will provide and analyse based on market trends, evaluations of competitors and the exploration of new business models. This all develops the most suitable strategy for you and your current circumstances. Working with us gives you an experienced strategic consultant right by your side, able to answer all your questions. This in turn will help you deal with difficult decisions that once seemed impossible.

Joe Sword, Director of Strategic Advisory, believes, “It is vital, especially in challenging economic climates, that all business owners have their fingers on the pulse of the financial health of their business. The earlier you can identify challenges, the better chance you will have of navigating them effectively. Too often generally profitable businesses find themselves in a critical situation due to lack of clear information on where their business is at. There’s minimal to no forward planning and a reluctance to speak up. My one recommendation to all business owners would be to speak up. If you feel unsure about the health of your business, or you are experiencing a challenge, sometimes the challenge isn’t actually as bad as it seems. Leaving it can result in the small crack becoming a gaping hole, which has the potential to leave your business in a critical state.”

We hope this has outlined to you why insolvency is on the rise and how advisory services can help avoid it. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.