Spotting financial distress early can be the difference between stabilising a business and watching problems escalate. Directors have legal duties to act in the best interests of creditors once insolvency becomes a real risk, which means early action is essential. This guide explains the key early warning signs of insolvency and the practical steps directors should take immediately to protect the company, its stakeholders and themselves.
1: Cash flow strain
One of the first indicators of impending insolvency is consistent pressure on cash flow. Warning signs include:
- Struggling to pay suppliers on time
- Relying on short term loans to meet basic expenses
- Delaying payment of key operational costs such as payroll or rent
When cash flow…