During a recent Partners’ meeting we noted that company administrations seem to be occurring more frequently. Wanting to find out if this was anything more than a subjective impression, we investigated. It turns out that our feelings were justified.

The Insolvency Service, an executive agency of the Department for Business, Energy and Industrial Strategy, publishes quarterly insolvency statistics. They cover creditors’ voluntary liquidations (CVLs), compulsory liquidations, administrations and creditors’ voluntary arrangements. (Actually they also cover administrative receiverships, but the last one of these happened in Q1 2018.)

Over the 12 months to 30 June 2019 these broke down like this:

In total, as helpfully adjusted for seasonality by The Insolvency Service, the picture over recent years is:

Over the 12 months to 30 June 2019 there was an 11% increase overall, and notably a 28.5% increase in administrations.

This is clearly a worrying trend and is a timely reminder of the importance of acting early: if you take the difficult decisions while there is still time to make a difference, it may be possible to avoid reaching the point when one of the insolvency routes becomes inevitable.

A key area that is often an indicator of for future problems is having difficulty making quarterly VAT or corporation tax payments. This signals cashflow issues and should always prompt you to review your cash generation and usage. Another is growth in debtors or creditors that’s out of proportion to any growth in income.

 For many business owners, though, the first signs of potential difficulty are more of a feeling than concrete facts. If you do have these concerns, don’t brush them away or dismiss them as “just a blip”. Take a serious look at why you feel uneasy and ask Barnes Roffe to cast their eyes over your operations.

It may prove to be “just a blip” indeed; but it may turn out that your prompt action will save the entire future of your business.