TOP FIVE SIGNS: KNOW WHEN TO FOLD
12 June 2015,
STRUGGLING business owners should learn when to cut their losses and close the business instead of waiting until they are forced into it, according to RSM Bird Cameron.
The accounting firm says owners will be more able to fulfil their salary obligations to employees by deciding to close the business before it fails completely.
An earlier wind up would also mean less time for debts to accrue interest, make it easier to secure buyers for company assets and deliver a better outcome for shareholders and creditors.
RSM Bird Cameron national head of turnaround and insolvency Andrew Beck says everyone benefits from an early decision.
"While the mantra for many business owners is to never give up, sometimes it can be smarter to quit now rather than hold on," Beck says.
"By making the difficult decision to shut the business down sooner rather than later, business owners can make the loss easier on employees, shareholders and other stakeholders, as well as protect their own reputation."
Financiers are more likely to recoup their costs if the company is wound up before it ends up in the hands of receivers, while suppliers can also take steps to replace the lost income with new customers.
Beck says liquidation, receivership or insolvency is also a stressful process for business owners.
"Their personal finances are not necessarily immune and at the very least they will receive regular and escalating calls from creditors chasing payment," he says.
"They can avoid this by getting financial advice immediately and taking steps to fulfil all obligations as soon as possible."Regardless of the circumstances, keeping an open line of communication with all stakeholders is the key to a smoother and less painful closure."