Trading Losses - is this the end?
16 March 2016
Trading Losses are a warning sign that your business is experiencing financial difficulty and can point to impending insolvency.
Trading Losses are effectively the "bottom line" in your Profit and Loss Statement -Income less Cost of Sales less Operating Expenses. Many factors can contribute to trading losses – a downturn in sales, perhaps a stock issue or a larger than usual expense. Many businesses will experience trading losses at some point.
Trading losses are like a cancer eating away at the value of your business. If you hold on longer than you should, all of your equity in the business will eventually be eroded leaving you exposed to personal guarantees. Trade creditors and suppliers who deal with your business will suffer the loss of what is owed to them and you will lose your hard earnt reputation.
The longer you hold on to an unprofitable business, the greater the risk that you will lose everything.
When do you need to do something about trading losses?
Trading Losses on their own do not necessarily mean a company is insolvent. They do however signal that attention is required to understand the reason for the loss and what can be done to turn the business around.
A review of your cost structures, how and where you source goods and services, and how you record the businesses transactions, can have a drastic effect on how you trade. Sometimes it is as easy as better recording and review systems.
You may be able to refinance or raise funds from shareholders to give your business the cash injection it needs to turn things around. You may be able to sell the business or cut your losses and close down the business before you lose everything.
Obtaining timely, professional advice can help you assess the causes for the losses, whether the problems can be resolved and if so, a strategy to continue operating and turn the business around.
Don't let trading losses erode the value of your business or risk your personal assets. Take action now to protect your assets and your family. Call Rodgers Reidy for an independent, objective assessment of your business. Rodgers Reidy are experienced in advising and working with businesses in financial difficulty and have the skill and expertise to help you achieve the best possible outcome for your business.