From The Brink of Bankruptcy

How do I avoid bankruptcy?

What happens when a sole trader finds themselves in the unenviable position of facing bankruptcy? We want to show you that this doesn't have to be the end of your story. With the support of Laurus Business Advisory Services (“Laurus”), we can help make sure it is just the start of a new chapter. Helping you to find the light at the end of the tunnel, just like we did in the following case…

The Background

A few years ago, I was contacted by the owner of a Forklift Truck Business who had reached a critical stage in his business. He had been doing really well, was making a steady profit, and was up to date on all payments to HMRC and suppliers.
Then suddenly he was involved in an accident which left him unable to work for a considerable length of time. A long road to recovery was ahead. But with a determined attitude, he was able to overcome his injury and build his business back up and begin to pick up work once again.
However, what was initially viewed as a success story of overcoming adversity, beating an injury, and relaunching a business suddenly took a worrying turn. Placing the whole future of the company, he had worked so hard to build back up, into serious jeopardy.

The Problem

Even though his business was profitable, and he had a diary full of work coming in, he had made a critical error since relaunching the company. Which we see so often with sole traders in similar circumstances.
My client's primary focus had been on bringing in trade and getting his business profitable. He had been putting the 'background-work' of being a sole trader onto the back burner. During his period of incapacity, he had not been filing his returns with HMRC. Now it was coming back to bite him in the form of assessed taxes from HMRC, which resulted in them presenting a petition for his bankruptcy on these assessed unpaid taxes.

At this stage, many businesses simply don't know what to do or where to turn to.

Even though the business was profitable, there was no cash available to pay off the debt. It seemed just a matter of time before the business he had worked so hard to build back up was about to come crumbling down, and this time, it really felt like the end of the journey.

Just to interject in this story for a moment. If you ever find yourself in this position or are currently reading this and thinking "Yes, this is me" I have an important message for you – Do Not Quit.

At this moment in time, the situation may seem hopeless. Still, there is always something which can be done: ever an opportunity to explore and a reason to keep the faith. As the proverb says, the sunshine really does come after the storm. You just need to find the answer to your predicament, and that is where I come in…

- Support from Laurus Business Advisory Services

An initial consultation, at no cost, to help understand the situation

Even though he couldn't see a way to resolve the problem, he reached out to me for help, hoping that there was something that could be done to rescue the situation.

As with most cases, I knew there was, and so began not the ending to the story, but the start of the new chapter. This new chapter would hopefully lead to a happy ending after all.

At Laurus, we offer all clients an initial review meeting. There is no charge to this part of our service, it is purely there to allow us to understand the predicament and gather all of the information we need. This will help us discover whether there is something which can be done to positively rectify the situation.

Dealing with HMRC

After speaking with the owner, we were able to develop a plan of action to tackle the debt and work with HMRC to resolve the issue in a positive way for both parties.

As with most sole traders, there is no such thing as a traditional 40-hour week. The workload is often so demanding that by the time the work is finished, there is little time available to sort out the financial side of the business.

When you add on top, having to deal with the pressures and stress which comes with being chased for debts and threats of bankruptcy. It is no wonder that many sole traders are unable to deal with the situation and end up with nothing to show, for what can often be, a lifetime of hard work.

Not Giving Up

Having worked on similar situations for many years, I was determined to find a positive resolution. As always, the first hurdle was going to be one of the hardest to overcome. But, after initial reluctance, getting HMRC to agree to stop their bankruptcy proceedings was a great victory. This result gave my client a real boost. For the first time in a long time, he could see a glimmer of light at the end of the tunnel.

Six months of repayments, asset-management, careful money management, and financial planning followed. Then my client, who just half a year previous had believed he was fighting a lost cause, was able to declare himself debt-free to HMRC.

I look back now with a real sense of pride with what we were able to achieve. We resolved the situation and put my client onto a steady path towards a bright future for him and his family.

We found a bookkeeper and a more proactive accountant, so he wasn't drowning in paperwork. Leaving him more time to concentrate on growing his business and working towards a sustainable future.

As with many cases I come across, even though there are ways out of the situation, prevention really is better than the cure.

Here at Laurus, we can help your business to not only recover but also discover the best ways to avoid insolvency issues in the first place with smart, sustainable planning.

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