Top Risks for Insolvency in 2023

It’s been a tough year for business, which follows a tough few years prior, never a recipe for stability or success.

2023, sadly looks to be more of the same. As there are still businesses catching up or that have never recovered since the global pandemic of 2020 and many more that have not been able to weather the volatility of recessions, outbreak of war and a cost-of-living crisis, it is of no surprise to find this is the case.

Business interest rate rises

The Bank of England recently put-up interest rates again, which adds to this general summation.

It’s not just the Government and the insolvency industry that can see trouble ahead. For example, credit insurance specialists Atradius have predicted the following:

In 2023, major increases in insolvency will affect the United States (81%), the Netherlands (77%), Singapore (76%) and Italy (51%)
For many markets there will be an overshooting of normal levels of insolvencies in 2023 – a result of additional defaults of ‘zombie companies’.

The recession is unlikely to fix itself over Christmas, so well into Q1 of 2023, we will no doubt see the steady rise in insolvencies that have marked the latter months of 2022.

Signs to look out for to avoid insolvency

But what can businesses look out for to avoid insolvency or any risk of such? Here’s a few tips:

Communicate:

There is nothing worse in business than sticking your head in the sand and hoping that things will blow over. If you are struggling to meet invoices, need longer payment terms, can agree payment holidays or terms with your suppliers and customers or just generally make life easier on yourself, it’s best to ask if that’s a possibility. Banks, lenders, customers and clients will often speak to you about it at the very least. Negotiation is after all, a key part of business. To only seek negotiation in good and fruitful times is truly short-sighted in business. Be bolder and demand more.
Review:

It pays to review every single penny that goes in and out of a business. This may sound incredibly obvious, but many simply do not have a basic grasp on this. From the petty cash to the expense accounts of top execs, a handle really should be present for business owners. Make sure that you have cash flow analysis and future forecasting in place, otherwise you won’t know how your business is doing in even a basic sense.

Rid yourself of debt:

If your business owes money and it is creating a void in your overall day to day dealings and ability to function, it should be an absolute priority to bring this number down to zero. Whether this takes some negotiation or other means of finance, if a debt is simply being serviced without it being reduced, there’s something amiss and it will stifle your ability to avoid insolvency for as long as it is around. Stepping through the options methodically will likely reveal a way to either overcome or at least reduce the burden this places on your ability to run your business.

Look back at your business plan to look forward:

If your business plan isn’t refreshed every year and in between in step changes, then you are at serious risk of chasing ideals and goals that simply are not there any more. The market can change around you incredibly quickly and as we’ve seen in recent years, even larger entities can be affected quickly and with severe consequences. Look at your original business and its intentions, are those intentions still realistic? Equally, is there an avenue you could investigate that could open up lucrative new opportunities that could transform your business? It’s really worth a look.