October is a time of budgeting. The Irish Government was first out of the traps with Budget 2025, and the UK Government will follow suit at the end of this month.
For families operating household budgets, the shorter and colder days bring with them increased electricity and heating costs.
And it is no different for companies. The autumn and the winter bring with them health warnings for companies in Northern Ireland. Whilst corporate insolvency figures have not yet returned to pre-Covid levels, November has recorded the joint-third highest, joint-second highest, and outright second highest monthly number of insolvencies in 2021, 2022, and 2023 respectively.
Halloween need not be so scary if at-risk companies act early by seeking professional advice. Many owners or directors may simply be unaware of the issues or the scale of the pressure their company is facing, making it all the more important that they know the warning signs of financial failure.
Reduced cash flow is the ultimate sign of financial distress and an indicator that a company is in danger of not being equipped to pay debts. The first step for companies in this situation is often to pass costs onto the customer to maintain profit margins, but there are limits to the amounts that customers will pay.
Failure to meet tax obligations is also a common indicator with HMRC often the largest creditor in a formal insolvency process, and with rumours of increases to National Insurance payments made by employers in the forthcoming Budget, employers will need to build this possibility into any financial planning.
Other indicators include failure to pay pension deductions, bonuses, finance and mortgage repayments. With such a heavy emphasis on skills development and career-long learning in Northern Ireland today, a less obvious sign could be a failure to properly invest in staff development.
Talk of business collapse has become normalised in today’s economic climate, but none of these issues are necessarily a death knell for a company. However, this set of circumstances does have the potential to push them to the end of viability for some companies.
Regardless of the industry, the advice for any company in a difficult financial position remains the same: act early and seek professional advice before it’s too late.
A company’s accounts will give a good indication of business performance, and timely management accounts should highlight any red flags that need further exploration before the situation becomes irretrievable.
The earlier professional advice is sought, the more options for business recovery will be available to avoid the situation becoming beyond the company’s control.
- Lisa Lappin is restructuring and insolvency director at Baker Tilly Mooney Moore
