An insolvent business is a bomb ready to explode - How solvent is yours?

There are two main ways to determine if a company is solvent. First, the activities of the balance sheet exceed its liabilities, resulting in a positive equity owners'. Secondly, there should be a positive cash flow in the lower part of the statement of cash flows. This essentially means that the company receives an income sufficient to cover debt payments on time.

Liquidity problems that are not readily resolved can lead to very serious consequences for the company. If you do not brake in time, not being able to pay your debts will result in having to declare bankruptcy and close all of your business. In many cases, by the time a company realizes that it may be at risk of insolvency, it is already too late.

To not let this happen to you, it is important that you are able to identify and pay attention to warning signs of an insolvent business. Some of these are:

o The cash balance in your bank account is dwindling and the current account has increased dramatically

The increase in inventory levels, or in front of static or declining sales

Or constantly deferred debit the customer's collections

or habitual late payment of invoices from suppliers (vendors are not paid for more than 90 days)

o When creditors start asking in cash immediately after birth

o An escalation in the search for suppliers who are willing to give more credence

o An increase in the number of applications received final

In case your business is already experiencing one or more of these signs of insolvency, you must urge a serious professional help or contact a specialist insolvency. If you are able to take off the signs early enough and take the right action, there's a good chance that you may be able to save the company from bankruptcy and extinction.

For more information on how to save your business if you are in trouble, see my article titled The 5 Warning Signs that your business is in decline .......