Small businesses must be aware of insolvency warning signs, it has been claimed.
The number of insolvent businesses in the UK is set to rise, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
The 15-month-long credit squeeze is primed to affect the economy as a whole, which will leave many businesses unable to settle debts or pay wages, the organisation claimed.
It is now warning business owners that trading with knowledge of insolvency can result in civil or criminal penalties.
ICAEW head of SME issues Clive Lewis said: “Although it can be difficult to know exactly when your business is insolvent, there are several warning signs that should make alarm bells ring.”
The ICAEW warns that businesses should look out for danger signs such as a tight overdraft limit, falling behind on payments to creditors and routinely paying on final demand. It is also recommended that small and medium business owners seek help if they are in difficulty.
Lewis added: “We face prolonged tough times, so it is worth investing some time and effort in getting your business in shape now. An early conversation with a chartered accountant or qualified insolvency practitioner might help get the business back on an even keel. This might be preferable to a long drawn-out decline.”
© Crimson Business Ltd. 2008
