Signs of Business Bankruptcy & Its Long-Term Impacts

When a business files for bankruptcy or a complete business closure, it does not only affect you as a business owner but it also affects the employees you have under your wing. It can even take a toll on your overall health with the stress it causes. A company’s bankruptcy doesn’t just happen overnight for it is usually a series of events that slowly show how your business or finances are gradually losing money and the need to let go of employees and assets become apparent. Aside from that, here are some of the key signs of bankruptcy to watch out for and how it can affect you on a long-term basis:

Big money cuts :

When the company begins to notice a decline in their profits, one way of compensating for the loss will be making big cuts on their budget for benefits such as pension plans and health benefits for the employees. Ideally, this shouldn’t happen at all since the aforementioned benefits were part of the contract of the employees. Such type of budget cuts are signs that one’s own company may be facing a big trouble ahead and can become worse over time.

High turnover of employees and executives :

A high turnover of employees and executives isn’t a sign of a healthy and successful company. More often than not, it means there’s a certain imbalance within the company management and finances that not a lot of people know about. There are many reasons why a company would have a high turnover of employees and executives, including:

• Low pay
• Company mismanagement or incompetence
• Bad leadership
• Problematic systems

Surprising financial statements :

Accounting of a business’ spending, as well as its debts and credits, is one way of knowing whether the company is losing money or gaining money. One way of finding out if a company is on the way to bankruptcy is when there seem to be shocking financial statements that seem to come out of nowhere. This also shows up when there are long delays in between the time the company spends versus when it collects the cash receivables from its own sales.

Selling parts of the company :

There is only one reason why a company would sell some of its departments, brands, flagship products, and properties—when it is no longer providing them enough profit and it has become more of a burden with its required upkeep. Selling it would mean the company requires more money than what its current assets are able to provide. Selling one of the company’s properties can compensate for the aforementioned budget cuts such as health benefits and pension plans or it can even help to pay out some of its current debt.

How it can affect your company :

Key signs of bankruptcy are similar to symptoms of an ongoing illness that can greatly damage your health—they need to be addressed. If any of the above-mentioned signs sound familiar, they need your attention. Thankfully, if you have kept an eye on the changes going within your company, you might still be able to do something to save it from total bankruptcy which can result in the termination of your employees and executives, selling of assets and properties, and excessive loss of money to pay of the creditors. If you want to make the most out of your bankruptcy options, knowing the difference between business and personal bankruptcy is a must. You can click here to learn more information.

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