Bankrupt Businesses List Myths And Facts

Apr 25th, 2014 | By | Category: Info

Over Easter there was a large fire at Coorparoo in Queensland, where a number of small businesses were burnt out. This is a devastating event for any business. However, what made it more so was that a number of the small businesses weren’t insured.

What was the effect? Let me talk to you about one small business and the impact this has had on them. This small business was a service business; they were beginning to get a brilliant reputation in this sector and had a number of major contracts on the go. They had employed a number of staff to operate in the business and things were looking rosy.

However, cashflow forecasting is equally important to a small business because it is to a large corporation and there are a number of firms that can help with cashflow forecasting in Birmingham and the West Midlands. The importance of maintaining cashflow for any business is obvious to all. However, surprisingly often this fundamental aspect of running a company is overlooked or neglected. Cashflow forecasting can tell the difference between a business remaining viable and growing and a business having a liquidity crisis and failing. In fact cashflow is among the most cited reasons why so many small businesses fail during the first five years of trading.

Cashflow forecasting is not difficult. At its most basic a cashflow forecast should inform the business owner about potential shortfalls in cash balances before they happen. These in turn means that funds can be better managed so that bills can be paid, and procurement of non-essentials can be postponed until better financial times. It is relatively easy to understand whether the money coming in will be enough to pay suppliers and employees. It becomes harder when a business owner needs to understand how quickly payments are coming in-especially if credit is extended and the company has a large customer base. This is where a management accounts firm in Birmingham can come into its own. Any good management accountancy firm will be in a position to offer cashflow forecasting services in Birmingham. An in depth report into the payment behaviour of a firm’s customer base can help that business to forecast payment receipts and even change in house credit or payment policy to better suit the business.

Another reason to regularly and accurately forecast the cashflow into a company is that banks like to see records of this part of the finance. A loan or overdraft may be offered in the light of a realistic cashflow forecast. The lack of one can give rise to the bank refusing credit and the business being unable to expand or buy more stock and equipment. Cashflow forecasts are also vital for future budgeting. Whether or not to invest in new premises, equipment or staff can rest on how healthy the books are likely to search the months to come. There are several ways to go bankrupt, making sure that cashflow problems aren’t one of those ways is going a great way to ensuring a small business thrives and grows in the future.

Insurance was on their to do list, but as things got busier and busier it never seemed to make it to the upper part of the list. As their information was essential to their business, they regularly backed up all of their computers.

Then the fire struck and the business was completely burnt out. All the computers melted and as they didn’t take the back-ups off site, the back-up system was also melted. All of their data disappeared in a puff of smoke, as did all of their client files, project notes, fixtures and furniture.

Instead of generating income, they now were faced with additional costs of the attempt to recreate their data from their memories and from clients. Their employees suddenly lost their jobs as the company couldn’t afford to keep paying them with no income coming in. their big contracts looked very shaky.

To make it worse the capital of the business was 6 months pregnant. She is now confronted with the very real and hard decision of whether or not to shut down the business or to try and start it all again from scratch at a time in her life when she should be slowing down. At the moment she’s working from her kitchen table and still sorting out her needs and priorities.

All of these excuses are very limiting and will cause your problems. If you believe business insurance is too expensive start to add up the expenses of starting from scratch. Also look at the message you’re putting out about the value you place on your company and how important it is to you.

For a home based business-no your general home insurance doesn’t cover your business. In case of thieving, fire or other disaster your business and computers will all disappear not to be replaced.

In terms of the act of attraction if you concentrate on the loss of your company, yes you could be creating a problem. However, the law of attraction doesn’t say ignore the problem. All of the best teachers suggest you need to get conscious of potential issues, take steps to counter the risk and then dont put any more energy into worrying about it.

There are many business insurance policies out on the market, each of them different and with different inclusions and rules. If you’re not comfortable with researching the policies, you may wish to think about an insurance agent to help you identify the right cover for you.

Other things you may wish to consider include business interruption insurance (covers you in case your business is interrupted because of damage to your property as well as cover to rewrite material if your back-up didnt recover effectively etc), insurance to cover you if an employee embezzles or misappropriates money, vehicle insurance, and machinery breakdown.

One of the things to remember is that most policies dont cover your laptop or mobile phone. They need to be specified so as to be covered so double check this with your insurer.

People-if you employ people you need to guarantee they’re covered with workers compensation and superannuation, but if you’re self employed you may need to take account of personal accident and injury policies to cover you in the event of your own illness, death, or injury.

Liability-This is a zone that many small businesses dont consider. However, missing this out can make you bankrupt if a request is made against you.

With liability you need to integrate public liability covering your business in case you cause death or injury to person. This can come from something as simple as someone slipping on a mat in your home, or someone tripping on your briefcase at a coffee shop when you’re meeting a client.

Professional indemnity protects you in case someone acts on your advice and this causes a loss to their business as a result of such advice. Product liability covers any injuries or loss arising from people using your products and the goods being faulty or causing an injury.

Aside from insurance you also need to establish some simple routines such as a low of a weekly computer back-up that is stored off-site.

For critical paper documents you may wish to consider installing a fire-proof safe or filing cabinet in your office but dont use these to store your computer back-ups in as they’ll generally melt in a fire.

Insuring your business success is an issue many small businesses dont think about until it is still too late. Use the Easter fire as a message for your own business, double check your policies are current and effectively cover what your business needs and schedule in an annual check to ensure you’re getting the best deal from your insurance.

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