If your company is facing financial difficulties, there are steps you can take to try to stay out of bankruptcy court. These tips may help temporarily or they may help permanently depending on how far down the road you are toward financial collapse.
1. Cut Your Expenses
You want to slow your cash flow problems if you have realized you don't have enough money coming in to pay the bills. One way to do that is to cut your expenses as much as possible. Develop a short-term cash flow analysis. Decide what bills you have to pay now, such as taxes and overhead. Pay those and negotiate other expenses with your suppliers and other creditors. Try to get them to extend your terms until your financial situation is under control. They will likely try to work with you as they would rather be paid than caught up in bankruptcy court.2. Analyze Your Bank Accounts
If you owe money to a bank and have your bank account at the same bank, the bank can raid your bank account to pay your bill. You might want to consider using more than one bank for your financial affairs, which is a typical business practice. You may want to have two business accounts, including one at the bank where you have your loans. That bank may insist on an account there to serve as a compensating balance. Keep your money, other than the amount required for the compensating balance, at another bank.3. Pay Your Payroll Taxes
It is particularly important to pay your payroll taxes in full and on time. Even if your business is a partnership or a corporation, the Internal Revenue Service (IRS) can hold you personally liable for the taxes withheld from your employees' paychecks. They can and will assess penalties on any unpaid payroll taxes. If you end up taking business bankruptcy, this particular debt will not be discharged.4. Don't Try to Hide Your Assets
Sometimes, if business owners fear bankruptcy, they try to hide their personal assets by giving them to family or friends. Don't do this. If you end up in bankruptcy court, these assets will be discovered and you could be accused and convicted of fraud. The purpose of bankruptcy court is to try to protect some of your assets from creditors so trust it to do its job.5. Fully Disclose Your Financial Situation
If you try to borrow money to consolidate your debts or for another reason, fully disclose your financial situation to your lending institution. If you don't opt for full disclosure, you could later be accused of fraud.
