The latest figures by the UK Insolvency Service reveal there were 22,109 underlying corporate insolvencies in 2022, an increase of 57% from 2021’s statistics.
There are several factors contributing to the increase in UK insolvencies:
- COVID-19 pandemic: The pandemic has had a significant impact on the UK economy, with many businesses facing reduced revenue and increased costs due to lockdowns and other restrictions.
- Economic uncertainty: The ongoing economic uncertainty has made it difficult for businesses to plan and invest, leading to reduced growth and increased financial stress.
- Brexit: The uncertainty surrounding Brexit has also had an impact on UK businesses, as companies face increased tariffs and trade barriers with the EU.
- Personal debt: The increase in personal debt levels, particularly due to credit card debt and payday loans, has also contributed to the rise in insolvencies.
- Interest rate increases: The recent interest rate increases has put pressure on businesses and individuals with large debts.
- Lack of business efficiency.
- A lack of understanding and reacting to the business’s finances.
Overall, the combination of these factors has led to an increase in the number of UK businesses failing.
Unfortunately, most of the factors are beyond your control as small business owners but point 6 and 7 of the above is something you can control.
Lack of Business Efficiency
Small business owners can make their businesses more efficient by adopting the following strategies:
- Streamline Processes: Identify and eliminate repetitive or redundant tasks and streamline processes to reduce waste and increase productivity.
- Automation: Implement technology and automation tools to automate repetitive tasks, freeing up time for more important activities.
- Resource Management: Effectively manage resources, including time, staff, and finances, to optimise operations and minimise costs.
- Financial Management: Implement strong financial management practices, including budgeting, forecasting, and regular financial analysis, to ensure financial stability and growth.
- Communication and Delegation: Encourage open communication and delegation of tasks to maximize the strengths and skills of your team.
- Regular Review and Analysis: Regularly review and analyse business performance, identify areas for improvement, and make necessary adjustments to improve efficiency.
A lack of understanding and reacting to the business’s finances
- Decision Making: Understanding your financial situation enables you to make informed decisions about your business operations, investments, and growth.
- Budgeting and Planning: Knowledge of your finances is crucial for setting and sticking to a budget, as well as making plans for future expenses and investments.
- Cash Flow Management: Good financial management helps to ensure the consistent flow of cash into and out of the business, enabling you to pay bills on time, invest in growth opportunities, and weather unexpected expenses.
- Compliance: Business owners must comply with financial regulations and reporting requirements, including tax laws, and must have a good understanding of their finances to do so.
- Transparency: Understanding your finances provides transparency and accountability, both internally and externally.
- Attracting Investment: If you plan to seek investment or take on partners, a good understanding of your finances is crucial for communicating your financial health and attracting the right investors.
When a business fails it often isn’t a surprise; the writing has been on the wall for a long time. Taking action now is important to ensure your business’ survival.
How we can help
Seeking outside assistance is crucial in ensuring your business’ survival – we are here to support your business to ensure that it not only survives but thrives. Working closely with an accountant can help you spot where things are going wrong and how to put things right.
