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If a company finds itself in financial crisis, it is important to take action. It is often possible to reverse a negative trend, even if it is difficult. But the longer you wait to tackle the problems, the harder it becomes to reverse the trend. Unfortunately, our experience is that many people wait too long to tackle the problems.

Reversing this trend requires hard work and planning. It is therefore important to consider whether you, as an entrepreneur, are prepared to make the necessary sacrifices. If the answer to this question is no, you need to consider other options, such as selling or closing down the company. 

If the answer is yes, the first step is to analyze why the negative trend has occurred and what alternatives are available. There may be alternatives and opportunities that you are not aware of. This often involves both immediate measures and measures that will have an effect in the longer term. 

Lack of liquidity?

Example: A common problem is a lack of liquidity. Analyze the income statement and balance sheet:

• Are there any costs that can be reduced in the short term or postponed?
• Is it possible to reduce capital tied up in, for example, inventory by reducing stockpiling and selling from stock instead of buying in?
• Is it possible to get paid faster by customers, for example through better collection procedures or by borrowing against customer invoices?
• Is it possible to obtain new credit, reduce repayments or defer/split payments?

If there are conditions that allow the business to continue, it may be possible to carry out a corporate restructuring, which is a way of reducing the company's debts through an agreement with the creditors. However, do not forget that the portion of the debts that must be paid must also be paid, which means that it affects liquidity. 

High risk of personal consequences

In these situations, it is even more important to follow various rules, as the risk of personal consequences for the entrepreneur is greater than normal. This may involve personal liability for the company's debts if the company's board of directors does not act correctly, but it may also involve criminal liability. There are also more rules to take into account. 

To avoid personal liability for the company's debts, it is important to closely monitor financial developments. If the company is operating at a loss, entrepreneurs must pay close attention to the size of their equity capital. As soon as there is a risk that it will fall below half of the registered share capital, the board of directors must draw up a balance sheet and take the necessary measures. 

Bankruptcy as the best option?

If the rules are not followed, the board of directors and, in many cases, the owners become personally liable for the company's new debts. It is also important to pay taxes and fees on time, as the entrepreneur may become personally liable for payment if they are not paid on time. However, it may be possible to obtain a deferral of payment of taxes and fees.

If it is not possible to reverse the trend, bankruptcy may be the only option left. Bankruptcy means that a bankruptcy administrator liquidates the company's operations and its assets and liabilities. In a bankruptcy, an investigation is also conducted to determine whether accounting and balance sheet rules were followed prior to the bankruptcy. Planning is also required prior to a bankruptcy. 

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