Leading Causes of Insolvency in Most Businesses

Insolvency is a state where an individual or business is unable to pay back money owed to lenders. You can find yourself in that state at one time or the other because of some of the decisions you make. It is after insolvency where you can file for bankruptcy. The two are entirely different because bankruptcy is a legal action where insolvency is just a state where you are unable to pay money owed to lenders.

You can also undertake a member’s voluntary liquidation. Well, this is the process of winding up all your company’s affairs following insolvency. You will close your company and distribute your assets to your claimants. Hiring an insolvency practitioner can be beneficial when faced with such a situation. This is an expert who will help negotiate with your lenders to ensure you have a smooth process winding up your business.

They can also help in restructuring your business by negotiating with your creditors to ensure things get back to normal and turn out more profitable. Look for someone who is licensed for the job and also has the required experience. You can also consider the amount they will be charging you for such a service. There are several things that can drive a business to insolvency. They include:

Late Payments by Clients

Clients who fail to pay you on time can drive your business to insolvency. They can owe you money through business projects or some of the services rendered. Some of them will make late payments, and others will not pay you at all. This is something that can drag you as a business and drive you to insolvency.


It is one of the things that can result in business failure if not handled correctly. Your competitors can use different practices that will always keep them ahead. Failure to try out practices that can also keep you ahead of your competitors or at the same level as them will leave you counting losses and subject your business to insolvency.

Poor Business Practices

Some business practices can also drive you to insolvency. You might find yourself engaging in certain activities that will leave your business counting losses. A perfect example is when signing a contract without considering the obligations that come with it. This can land you in deep trouble. Avoid these mistakes to prevent business insolvency.