If you experience any of these common insolvency red flags, it’s important to act fact.
Running a business comes with its ups and downs, but if financial pressures are mounting, it’s important to recognise the warning signs of insolvency before it’s too late. Acting early can mean the difference between turning things around and losing control of your company.
At McAlister & Co, we provide expert company insolvency services to help struggling businesses assess their position and make informed decisions. So, if your company is experiencing any of the warning signs below, it’s time to seek professional advice.
Insolvency red flags you shouldn’t ignore
1. Cash flow problems
Cash flow is the lifeblood of any business, and ongoing difficulties in meeting day-to-day expenses are one of the earliest signs of financial distress.
- Struggling to pay suppliers on time?
- Constantly using overdrafts to cover expenses?
- Unable to set aside funds for VAT or PAYE?
If cash flow issues persist, debts can quickly spiral out of control, so if you are experiencing any of the red flags above, it’s important to act fast.
A cash flow forecast can help identify problem areas, and an insolvency expert can advise on solutions like a company voluntary arrangement (CVA) or business restructuring.
2. Increasing pressure from creditors
When creditors chase payments more aggressively, it’s a sign that your business may be heading toward insolvency.
- Receiving payment demands or statutory demands?
- Suppliers refusing to extend credit terms?
- Facing county court judgments (CCJs) or threats of legal action?
If your creditors are applying pressure, don’t ignore the problem. There may be options available, such as negotiating repayment terms or seeking company insolvency services to protect your business.
Although it can be tempting to bury your head in the sand, the fact is that the sooner you seek expert help, the more options you will have available to you.
3. Struggling to pay HMRC
Falling behind on tax payments is another major red flag - and HMRC is often one of the first creditors to take action when payments are missed.
- Late or missed VAT, PAYE, or Corporation Tax payments?
- Struggling to meet a Time to Pay Arrangement?
- Receiving warning letters or threats of enforcement action?
If you owe HMRC money, it’s important that you act fast. It may be possible to negotiate a repayment plan such as a Time to Pay arrangement, but if you ignore the issue, HMRC can issue a winding-up petition, forcing your business into compulsory liquidation.
4. Declining sales and profit margins
If your business is no longer making enough profit to cover its costs, it’s a sure-fire sign that insolvency could be around the corner.
- Sales figures consistently falling?
- Profit margins shrinking due to rising costs?
- Relying on discounts or promotions just to break even?
If any of these red flags sound familiar, a business turnaround strategy or restructuring could help, but if the decline continues, liquidation may be the best option. Seeking professional advice early can increase the chances of saving your company.
5. Struggling to pay employees
If your company can’t meet payroll obligations, it’s a clear sign of financial distress.
- Delaying staff wages?
- Cutting hours or making redundancies to stay afloat?
- Missing pension contributions?
Employees are legally entitled to their wages, and failing to pay them could lead to serious consequences. If you’re in this position, seek immediate help from a licensed insolvency practitioner for practical advice on what to do next.
6. Mounting debt with no repayment plan
Taking on debt to invest in growth is normal, but if your company is borrowing just to survive, it’s another warning sign of insolvency.
- Relying on loans, overdrafts, or credit cards to pay bills?
- Unable to secure new finance due to poor credit?
- High-interest payments eating into profits?
If all this sounds familiar and debts are piling up, solutions like a company voluntary arrangement (CVA) or pre-pack administration could help you regain control. An insolvency expert can assess your financial situation and explore the best options.
7. Using personal funds to cover business costs
Many business owners dip into personal savings to keep things going, but this can be risky.
- Using personal credit cards or loans to cover company expenses?
- Taking out personal guarantees on business debts?
- Struggling to pay yourself a salary?
If you’re using personal funds to prop up your company, it’s time to reassess your financial position. Seeking company insolvency services can help determine whether rescue is possible or if closure is the better option.
8. Winding-up petitions or legal action
If creditors have lost confidence in your ability to pay, they may take formal legal action to recover what they’re owed.
- Receiving a Statutory Demand (a formal request for payment)?
- Facing a winding-up petition?
- Bailiffs sent to recover assets?
Once a winding-up petition is issued, your company’s bank accounts can be frozen, making it impossible to trade. Acting quickly is essential - which is why you should always reach out to a licensed insolvency practitioner to help explore last-minute rescue options.
What to do if you spot these warning signs
If your business is experiencing any of these warning signs, the most important thing is to act quickly. Delaying only limits your options and could lead to personal liability for company debts.
At McAlister & Co, we provide expert company insolvency services, helping businesses assess their position and determine the best course of action. We offer solutions including:
✔ Business rescue – CVAs, administration, and turnaround strategies.
✔ Debt restructuring – Negotiating with creditors and HMRC.
✔ Liquidation – If closure is the best option, we ensure it’s handled professionally.
Every business is different, which is why we provide tailored advice to help you make the right decision. Don’t wait until it’s too late - if you spot the signs of insolvency, get expert advice today. Contact us today to learn more about how we can help.