The very thought of bankruptcy leaves us with a negative vibe as if nothing can save an enterprise or entity from its grab.
So what is bankruptcy? Statista succinctly explains bankruptcy as the process of relieving a business or person from debt when they can not pay it. While most bankruptcies are filed by individuals, there are many more businesses also filing due to financial stress.
There may be very little you can do if your company is at the margin of insolvency. However, when you can detect the early signs of financial bottlenecks, saving the business is possible. Orlando bankruptcy lawyer Walter Benenati suggests that insolvency is manageable only if a company can act strategically during the crisis.
Avoiding Business Bankruptcy
Let’s look at how you can hone the leadership mindset needed to proactively avoid business bankruptcy.
Begin With Blank Slate
The chances of running into financial bottlenecks remain higher during the first few years of a business. Start-up organizations often find themselves submerged in debts and dues they can hardly pay off. When a company starts its journey, well-wishers shower the entrepreneur with their blessings and business experiences.
Some of these words of wisdom may help you, while some can cloud your mind. Always remember that your business is different from theirs. A market is a dynamic place that evolves every day. Hence, the problems their businesses once experienced might not be the once yours will face. If you can monitor, analyze, and proceed with a clear mind, the probability of a financial disaster can be lower.
When a company faces financial problems, it might take random steps to improve the situation. But that is the time to think about the best ways of rectifying an almost insolvent situation. You should be careful about the long-term consequences of these emergency moves rather than their short-run impacts.
Without the right steps, even the most booming industry can have companies with mounting debt. For example, retail is one of the promising industries these days. However, companies like Neiman Marcus, Ascena Retail Group, and J.C. Penney have failed to keep their businesses afloat. In 2020, these retail companies declared themselves bankrupt. (Source)
Manage Your Human Capital
Companies, standing on the verge of insolvency, analyze departments to spot which have cost overruns.
If there’s still time to turn it around they will adopt digitalization and software solutions to improve productivity. While the very act of digital transformation can disrupt business and staff it’s necessary for the business to remain competitive.
Staff displaced by business process improvement can be utilized in higher-value roles that use their skills and potential productivity.
Therefore not all detection of financial overspending is damaging to staff retention.
Adopt A Realistic Approach
Addressing this crisis and mending it requires strategic planning. Suppose you have detected substantial financial drainage and wish to fix the problem. In that case, you need to give yourself or the team a feasible deadline.
If you think you can rectify a problem as critical as insolvency within a few hours or days, you need reconsideration. Talk to the experts and devise a plan with fair chances of success. Facing the problem with courage and determination is more critical than encountering it as a hero. The random moves may seem gallant, but you need a foolproof plan.
Keep Fear And Pride Away
Desperate times call for desperate measures. When your company is standing on the brink of bankruptcy, adopt a friendly attitude and collaborate with your peers and staff. Two heads are always better than one. Your colleagues, partners, or employees can offer valuable suggestions to save the boat. If you let your pride come in your way of reaching out for help, the battle will become more challenging.
Every bit of assistance and awareness helps. Work as a team, and you can triumph in any battle. Try to keep panic and negativity away from you. Fearing about the future does not change it. Acting promptly on the areas that need improvement does.
No business is immune to the challenges of operating profitably. As such only the very best enterprises survive the long haul.
Become a business that thrives through being more strategic with financial management. Even with healthy cash reserves, your role is to always keep a keen eye on costs and expenses. The survival of your business relies on growth. Investing wisely can prevent financial crises from bringing your company down.
Managing your creditors and debtors strategically from the outset is paramount to ensuring your business is prepared for unforeseen events that can challenge your existence.
Avoid going it alone too – have experts in your corner with your best interests as their primary focus. Top-rate business accountants and lawyers can help you navigate during good and hard times so your business avoids bankruptcy.
For further readig – did you know there are different types of bankruptcies for commercial entities with Chapter 7 being the most common?