The key to protecting a business against insolvency is remaining informed and critical of your finances. Recognising the early warning signs that indicate a business is approaching insolvency provides you with the best possible opportunity to receive professional advice and solutions. Approaching a firm that provides insolvency services can ensure that you receive specific advice appropriate to the unique aspects of your business.

1. There are problems obtaining credit or the business is relying excessively on loans

Changes in the credit terms offered to a business can indicate that the business is approaching insolvency. If the business has to approach numerous credit providers before being successful in an application, or is only being offered credit at higher interest rates or with additional conditions that were not placed before, it may indicate that the business is in trouble. Seeking extensions for payment, demands for payment from creditors and threats of legal action are clear indicators that the business is not in good financial health

2. Repeated dishonoured and bounced payments

Repeated dishonoured and ineffective payments demonstrate that the business is not able to make payments when they are due. Being unable to pay bills and other expenses on time, is a sign that the business is not able to generate the necessary cash flow to remain on top of expenditures.

3. There are inadequate sales and a low stock turnover

Businesses falling repeatedly below a sales quota is an indication of approaching insolvency. Relying on big sales or contracts rather than reliable, frequent and consistent sales, suggests that a business is struggling financially. If a business is operating day-to-day without clear future goals, it can be an indication that management is operating in a short term capacity due to impending insolvency.

4. Falling share prices

Share prices are a measure of the confidence external stakeholders have in a company, therefore falling share prices are a clear indication of a company in crisis. It is important to view the share patterns of other businesses in the same industry, as falling prices in one business alone will indicate financial difficulties, however an equal fall across the industry will not be a cause for concern.

5. An increase in employees leaving

An unprecedented increase in employees leaving a business, particularly in management, can be an indication that the business is approaching insolvency. Often those in management with an inside knowledge of a business's financial situation will leave for positions in other companies if they believe a business may soon go under and leave them without a job.

6. Cuts in employee benefits and staff

If a business is forced to cut benefits and downsize their staff, this can often be a clear indication that the business is approaching insolvency. The deterioration of physical aspects of the business, such as aesthetics to make an office look appealing, business lunches and the loss of other extra perks that were once part of the job, are clear signs that a business is not as financially stable as it once was.

7. The business is unable to keep up with competitors

A business offering the same products and services whilst competitors forge ahead is a clear sign that the business does not have the financial security to invest in the necessary technology or otherwise to remain a competitor in the industry. Falling far behind competitors and losing clients can lead a business on a quick pathway to insolvency.

The key to the financial health and stability of any business is constantly reviewing and being aware of any financial changes in a business. Keeping track of financial records is the most important way to ensure that you are able to pinpoint any financial troubles early and reduce the risk of insolvency occurring due to inaction. Seeking the advice of professionals can ensure that you remain informed, aware and prepared for any financial difficulties a business may face.