Warning signs that your company is insolvent

Insolvency is defined as the point when a company can’t pay its debts when they are due. If your company is showing signs of financial problems, it’s your obligation as Director to determine as soon as possible if the company is at risk of insolvency. Being proactive in determining the viability of the business will give your company the best chance of recovery; and trading while insolvent is illegal and will disqualify you from government support. 

According to ASIC, some warning signs of insolvency include:

• poor cash flow 
• increasing debt  
• creditors unpaid outside usual terms 
• solicitors’ letters, demands, summonses, judgments or warrants issued against your company 
• suppliers placing your company on cash-on-delivery terms 
• payments to creditors of rounded sums not reconcilable to specific invoices 
• overdraft limit reached 
• defaults on loan payments 
• problems obtaining finance 
• change of bank, lender or increased monitoring/involvement by financier 
• overdue taxes and superannuation liabilities 
• increased level of complaints or queries raised with suppliers 
• an expectation that the next big job/sale/contract will save the company 

Of course, most companies will experience some of these at one time or another due to temporary cash-flow shortages, but it’s important to take early steps to ensure you can overcome them and avoid a forced insolvency appointment. 

If you suspect that your company may be insolvent, contact Auxilium Parters today to discuss how we can help. The first consultation with us is free.