When all precautions are taken and insolvency still looks likely, a CVA is recommended
Corporate insolvencies are steadily decreasing as the economy recovers. However, in the unfortunate instance where insolvency is likely, a company voluntary arrangement (CVA) is one of the available options.
This procedure, which is proposed by either a company’s directors or administrators, enables a firm to meet an agreement with its debtors to pay what it owes over an agreed period of time.
It is a flexible and cost effective way of dealing with a debt problem without filing for outright insolvency. In order for a CVA to be successful, a business must be viable with a healthy order book.
To prevent your business being pushed into insolvency as a result of late or non-payments from your customers, industry experts recommend utilising a credit insurance policy.
Martin Walmsley head of debtor insurance at Lloyds TSB Commercial Finance, said: “In the current economic climate, the rate of insolvencies is declining, with Q4 2010 figures showing a 11.3 per cent decrease compared to the corresponding quarter in 2009.
“However, management teams may still find, for a variety of reasons, that their firm is suffering. In this instance, a CVA, providing you have a sound business model and are capable of turning a profit in the future, can be a wise step to protect your company.
“Late payments and insolvent debtors can have a dangerous knock-on effect on a business’ cash flow and in order to safeguard issued invoices, a credit insurance policy is recommended to provide peace of mind and protect up to 90 per cent of their value.”