Key Signs Your Business May Be Headed for Bankruptcy

If there’s one thing you should learn in life, it’s that nothing is constant in this world. Having a successful business now doesn’t necessarily mean you’ll have the same in years to come. In the world of business, you simply don’t know what the future brings. Due to this unfortunate truth, there are instances in which everything gets tough, especially when business problems are growing. In fact, the possibility of going bankrupt is very big concern that you should be aware of. If you want to protect the interests of your business from bankruptcy, here are the key signs to watch out for when your company may be headed for bankruptcy.

  1. Missed Payments – When your current financial situation prevents you from paying your bills on time, this is a clear sign that you’re heading into bankruptcy. Your inability to keep up your payments for important business bills may increase your chances of going bankrupt, which can be difficult for businesses to recover from.

While you want to have more than enough cash on hand to pay your debts, bankruptcy is on your way if your business can barely keep your bills up to date. To provide you with a better understanding of how bankruptcy can affect your business, you can click here for additional information.

  1. Increasing Money Losses – A bankruptcy may take place if your company continuously loses money. When there’s a rapid decline in your cash flow this year compared to last year, then your business’ future may be at risk. It’s best if you review your balance sheet and check how you’re working with your cash flow.
  1. Switching Auditors – An abrupt switch of an auditor may be an indicator of a red flag. Most of the time, it’s uncommon for companies to change firms to review your books of accounts.
  • If this situation happens, there may be all sorts of confusion and disagreement regarding the way your revenue should be booked.
  • Another cause of concern is when an auditor starts to question the ability of the business to continue operating in light of some accounting discrepancies. If this is happening to your company, you should take these as warning signs to be mindful of.
  1. Top Management Issues – When senior members of the management team resign and take other positions in different companies, it may be an indication that your business is on the verge of bankruptcy. This usually happens because most of your top management members become fearful about their security tenure, which is why they think that getting out of your company is the best way to secure their future.
  1. Pull Out of Stocks/Shares You may be on the threshold of bankruptcy if your major stockholders begin to pull their investments out of your company. Many times, executive holders of stocks typically withdraw their shares ahead of the filing of bankruptcy or when the business has fallen on really difficult times.
  1. Selling of Equipment or Property – If your business is going through tough times, you will likely see selling of equipment or property as one of your options to recover from the verge of bankruptcy. The sale of assets takes place to raise money so you’ll be able to cover some business expenses.

Talk to a Bankruptcy Attorney Now

Practically speaking, not all business are in the same financial circumstances. While the key signs of bankruptcy mentioned above may not apply to your business, it is always wise to consider talking to a bankruptcy attorney, who can help you establish efficient means to prevent going bankrupt.

Michael Lawson is a specialist bankruptcy attorney who has helped many clients in the past move past their bankruptcy. He currently writes for Blclawcenter.com. In his spare time, he likes to enjoy some downtime traveling with his family.