Starting a business is one thing, and establishing it along with maintaining that progress are the other things. At times, the business owners and managers become too relaxed as soon as they have established it and achieved some milestones. In reality, this is the point when they need to be even more careful, put more effort into their business and avoid the path that leads to insolvency.
What is Insolvency?
Insolvency is the state when a business organization fails to pay its due bills, and its liabilities are more than the assets. In other words, the company is broke and does not have enough amount to pay to their debtors. When the matter is legally handled and disclosed, it is called bankruptcy. Every insolvent company does not file for bankruptcy. The tough market competition, as well as mismanagement of business accounts, are among the leading reasons for insolvency in the UAE.
Wondering how the situation can be avoided? Keep scrolling down this article to know how you can save your business from insolvency.
Top 7 Ways to Minimize Insolvency of Your Business
Ignoring the business accounts, books and dealings for too long can bring you closer to insolvency. You cannot check your accounts once in a while and think that you are done with your responsibility. Managing and maintaining the records on a routine basis is essential to track and improve performance.
Here are some important ways to minimize the risk of insolvency for your business.
1. Improve Cash Flow
There can be no greater threat of insolvency than the stagnant cash flow of any business. It is the first point that needs your constant attention and care. Improve your cash flow by ensuring to clear all the payables and receivables on time. It requires the skills and expertise of accountants, which motivates most organizations to consult the best accounting firms in Dubai and minimize their cash flow related issues with the help of experts.
2. Keep Your Books Updated
Your business books provide insight into all your dealings, expenses, profits, revenue and loss. Therefore, you have the responsibility of keeping your books updated. Managing the books is also essential because it keeps a detailed record of your transactions and expenses. Business expenses can increase or decrease according to the cost of raw material, and recording it is essential to properly plan for the future.
3. Manage Debtor and Creditor Books Separately
One of the most important ways to minimize the risk of insolvency of your business is to manage the books of debtors and creditors. While running a business, you have to deal with debtors and creditors consistently, and that is inevitable. You just have to ensure that your debtor and creditor accounts are balanced and are separately managed. Otherwise, your business is headed towards insolvency.
4. Analyze Your Accounting Procedures
While managing your business accounts, do not only focus your attention on transactions and account status. Try to analyze your accounting procedures, too, as it will help you strategically plan and execute the planning in the future. No doubt, you will not be able to do so if you are not an accounting expert. You can involve the experts and ensure to give a boost to your business operations with their support and guidelines.
5. Limit Late Invoices
Late invoices are among one of the greatest triggers of business insolvency. If you do not clear your invoices on time and use the amount for further dealing, you might suffer a loss in it. As a result, you will have to pay a fine or penalties for the late invoices. Moreover, after suffering the loss, you might not have enough amount to clear the invoices, which will lead your business to insolvency.
6. Reduce Your Business Expenses
Another important way to save your business from being insolvent is to reduce your business expenses. Your expenses should never be more than your profits. If they excel than your profits, you might have to take a loan to meet them. On the other hand, if you fail to pay back the loans, your business has a higher risk of being insolvent.
7. Consult the Professionals
The best way of saving your business from insolvency, even when there is a limited risk, is to consult professional accountants. Involving them in your business operations will not only help you better manage your books and accounts, but you will get a professional guideline to strategically expand your business. You can hire the service of one of the best accounting firms in Dubai and let the expert and trained accountants take charge of your business accounts, only to increase your profitability and popularity.
Do not wait for high time and start planning now!
One cannot establish a business overnight. It requires gradual planning and constant hard work. On the contrary, all your progress can hit rock bottom in an instant. To stop that from happening, you have to plan for the future and pay attention to your business accounts. If you lack accounting skills, it is always better for the experts on board, instead of endangering your well-established business. So, decide wisely and ensure constant growth and progress of your business.