Solvency continues to be a pressing issue

Posted on 27th March 2023 by Streets - Business Support

The recent rise in inflation and interest rates underlines the fact that the UK and world economies are still suffering from the effects of the continuing war in Ukraine.

Accordingly, if you have managed to retain profits in your business this buffer will help to see you through difficult trading periods as we endeavour to emerge from current challenges.

How long these reserves will last depends on how effectively you manage the process.

Planning is absolutely vital.

You need to figure-out what your short-term prospects for trading are likely to be and then quantify the minimum level of costs that you will need to carry in order to meet:

existing fixed commitments, rent for example, and
other variable costs to deliver any future trade.

If these calculations reveal that you will be trading at a loss for an extended period, the only way your business can survive is if:

your retained profits and personal capital introduced cover these losses; and
if reserves are exhausted, you are prepared to borrow to fund any shortfall.

Having real-time data at your fingertips will help, as will creating a forecast or budget for at least the coming year to see how expected trading will affect cash flow and solvency.

Please call, we can help you consider your options.

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.