10 Tips to Prevent Bankruptcy

10 Tips to Prevent Bankruptcy

🔥NEW No business is completely immune or safe from bankruptcy. Filing for bankruptcy is the last thing you want to do as a business owner. Certain business practices can help you to prevent this from happening! Here are 10 things businesses can do to prevent bankruptcy:

BE REALISTIC, NOT DREAMY (BE REASONABLE)
Don't exaggerate your expectations for the future, conduct budgeting in line with reality, and don't base it on the best scenario you wish. Remember that not all customers are loyal - they look at price, quality, and a lot of other considerations, when thinking about loyalty to you or your commodity.
HAVE A WRITTEN BUSINESS PLAN
Having a written business plan facilitates its understanding by the work team to do their tasks and direct their actions towards achieving the set goals. Therefore, make sure that the business plan is written and drawn in a way that shows strategies, tactics, goals... etc. In addition, be sure to circulate the results of the team's performance, and ask for feedback to identify strengths and weaknesses.
GIVE PRIORITY TO THE REPAYMENT OF DEBT
The business world is all about trust. If you lose it, you do not belong to this world anymore, and whoever gets out will have a hard time coming back. So keep in mind not to increase your debt block (don't over-expend), and make sure you prioritize your debt repayments.
AVOID UNNECESSARY EXPENSES
Review your monthly accounts. Focus especially on recurring (monthly) expenses for unused commodities. Nowadays you might use free apps like Skype or Teams for outdoor meetings instead of traveling.
KEEP IN TOUCH WITH THE LENDERS
If you are late in paying your debt on time, do not ignore the question or demand of your lender about the reason for the delay. Be clear and honest, because whoever trusted you and granted you her/his credit, will be patient with you as long as this trust exists (do not destroy the bridge of trust between you). On the other hand, communicating with lenders and informing them of your plans transparently will increase the ability to negotiate and extend payments, or to restructure debt terms again.
REVIEW INSURANCE POLICIES
Insurance expenses are one of the largest monetary blocks that consume a lot of business income, whether it be health insurance, fire or theft insurance, property or work-related injuries... etc. Therefore, make sure that you have the correct advice from an expert in the field of insurance management in order to be able to identify your main needs and ways to meet them at the lowest costs, as proper management of your insurance policies may reduce your expenses considerably.
TAKE ADVANTAGE OF ANY TAX REFORM
Governments in general from time to time seek to support commercial, industrial and investment businesses by providing certain incentives or implementing a package of tax reforms. Therefore, be attentive to such measures and do not miss the opportunity to benefit from them as they provide your business the possibility to access additional funds to pay off debts or make strategic investments.
SELL ASSETS THAT YOU NO LONGER NEED
A person is always accompanied by her/his emotions. Don't let emotions like your attachment to certain things put your business down. Therefore, be sure to sell any unused assets, as this will secure returns to pay your debts and provide you with space to benefit from them.
CREATE AN ADDITIONAL SHORT-TERM CASH FLOW
By making some adjustments to the business strategies you may be able to earn an additional short-term cash flow. For example: If you rely on credit selling as a basis for business, changing your strategy to become direct selling will provide more liquidity in your hands. The same thing happens, if you can get longer payment terms from the sellers. Increasing the cash flow in your hands will provide you with the necessary liquidity to meet your financial obligations.
SHARE BUSINESS PROBLEMS WITH EMPLOYEES
Try to be transparent with your employees. Show them the difficulties you are facing and what you are doing to overcome them. Get your employees involved in that, praise their work and do not underestimate their role in overcoming crises. Make them feel safe and also make them feel that the success of the company is the result of cooperation with each other. This will give them a feeling of satisfaction and comfort, which will reflect positively on the work, and they will feel that they are also the owners of success or failure. This will help them to accept salary cuts in times of crisis rather than being laid off, providing you with the cash needed to pay off debt.

⇨ If you have any further major tips, information or advice about preventing bankruptcy feel free to add them here!

References:
Scott A Chernich (2018), "How to Avoid Bankruptcy and Build a Strong, Successful Business," Foster Swift Collins & Smith.
Bradley James Bryant, "How to Avoid a Business Bankruptcy", Chron.