The world is moving along with a deadly pandemic that wiped out lives apart from hitting hard on some businesses. The governments have extended supportive measures for the rescue of the businesses which have proven to be effective, especially in the UAE. However, we cannot put the blame entirely on pandemics as some businesses were already reeling under pressure even before the novel Coronavirus struck the world. Such businesses have opted for the process of company liquidation in Dubai for reasons including financial constraints.
In this circumstance, the company liquidators in Dubai have identified the top reasons that may give the entrepreneurs an early red flag that their company is in distress. Identifying the trouble in advance may provide the entrepreneurs with a breathing space to find out some remedial measures such as restructuring the organization.
If you are an entrepreneur in Dubai, the key factors discussed in this article below will give you a hint about whether you are heading into liquidation in Dubai or not.
1. Inadequate Cash Flow
The age-old adage ‘Cash is King’ rings true for every business and cash flow is the vital fundamental that decides the growth prospects of a company. It is common that almost every company at one point or another experiences a dip in the money coming into the organization. However, if it persists for long, then it is the first warning for you that the company is in distress. If the money goes out of the business is bigger than the cash coming in, then it’s an indication that the cash flow is affected and action is required.
2. High-interest Payments
Paying high interest to lenders is a strong sign of the poor financial health of the organization. The high-interest payment is risky for the businesses as the banks would start to view the organization with suspicious eyes and would even doubt your company’s viability. If the banks are considering your business as high risk then paying off debts will become tougher for you. The banks will also ask you for much more personal guarantees and collateral against the loans they provide.
3. Defaulting on Bills
Missing the payments on time is not a story as far as businesses as concerned. Most entrepreneurs have experiences of defaulting on their bills due to some valid reasons or they may even merely forget to pay courtesy to some in-house employee. However, if your company is constantly experiencing this phenomenon of missing the due date of bills, it is a red signal. You are creating an impression that your company is unable to pay its way. You should note that defaulting on bills could suggest your business is under-funded or moving into liquidation. Missing bill payments mean your company’s reputation is at stake.
4. Extended Debtor or Creditor Days
Debtor days and creditor days are measures used for gauging a company’s efficiency and creditworthiness. If your company’s creditor or debtor days are increasing abnormally it means your business is in distress. If you are forced to delay the payments to the creditors, they might cut off the supply of important components in the company. Also, if you are unable to efficiently chase the payments, it means the cash flow problem is on the anvil. You need to keep a tab on the number of creditor and debtor days and if sudden changes in the numbers are identified it is a sure sign of insolvency. If it is too late to arrive at an action plan to save the company, you are required to have a discussion with reputed company liquidators in Dubai.
5. Messy Financial Records
A good company always ensures that business records are maintained accurately. On the contrary, messy business records are a strong indication that the company is treading the wrong path. You have to sort it out as soon as possible; you may even need to have a serious discussion with your accountant. If the mess on the financial statements is beyond redemption, then liquidation is imminent and you must be talking to company liquidators in Dubai rather than your accountant.
Consult the Best Company Liquidators in Dubai
Entrepreneurs opt for company liquidation in Dubai as a last resort when they fail to rescue the organization from insolvency. Financial problems including debt, late payments, inability to chase payments on time, and inaccurate financial records are some of the early signs that tell that business owners are heading for company liquidation in Dubai. Most often, the entrepreneurs seem to ignore such warnings even if the sign shows itself. If anyone of these warnings has been detected, the company can seek actions to redeem the organization. However, if business rescue is not your intention then the services of the best company liquidators in Dubai such as Jitendra Business Consultants (JBC) must have opted. Company liquidation in Dubai is a highly streamlined procedure that requires professional assistance. JBC will assist you in all the steps of liquidation in Dubai including the appointment of an official liquidator.