If you own a business and are experiencing difficult financial times, it may be time to consider whether a bankruptcy would be the best course of action. There are always slow periods for any business, and when margins become too thin this can lead to financial difficulty.
If your business is suffering a lack of cash flow, where accounts receivable are fewer and smaller than accounts payable, you may find yourself in the position of choosing which bills to pay. This can lead to severe problems, such as your utilities being turned off or secured creditors attempting to repossess their assets.
This can cripple your business to the point of no return, where diminished ability to function leads to ever fewer customers and even less revenue. This is when a bankruptcy may be necessary.
But when you file, you should carefully examine why your problems developed. Was it bad timing, such as the situation many businesses experienced during the great recession of 2008? Was it a problem with your product or service? Were you entering a too crowded marketplace, or were you too optimistic in your expectations.
If you can learn from your experience, and determine what caused your business to fail, a bankruptcy can be a tremendous learning experience, and in addition to the “fresh start” made available by the elimination of your debts, you can create a list of mistakes to avoid.
Many successful businesses are owned by those who learned from the “school of hard knocks” that is often the reality of the marketplace, and a bankruptcy filing is often part of that learning process.
Source: huffingtonpost.com, “5 of Our Favorite Tips for Dealing With Business Bankruptcy,” Nancy Laws, October 9, 2015