It can take very little to tip a business over the edge and into insolvency when the economic situation remains flat if not deteriorating in the ongoing economic crisis.
Very often there are knock-on effects to other companies working with, sub contracting to or supplying the business and then if it has gone into liquidation, these companies will also be affected.
Among the most common reasons for a company to go out of business is when creditors or clients fail to pay invoices and if the company has little margin to carry on and this happens with a big contract just one unpaid invoice can mean insolvency or even complete closure.
The construction industry has been particularly vulnerable to the economic downturn and the latest statistics from the UK?s Office of National Statistics indicate that activity in the construction industry remained flat in November 2011 but was down by 1.6% when compared to the previous November.
While some of the bigger construction companies have survived and even grown many others have gone out of business.
As part of the construction industry architects are also vulnerable in two directions, not only from clients who have commissioned design and project management work from them but also any sub contractors they may need to employ.
Cash flow and credit control are equally important to any business when there is an economic crisis and one protection that architects can take is to thoroughly research a prospective client?s credit worthiness, particularly if it is expecting a large contract that may involve a consortium.
There are two way to check on credit worthiness. One method is to use the facilities available through Companies House. It has several services and the only basic one that is free is to check on the name of a particular company online in the alphabetical list. There will be a note on the record if the company has been dissolved or is in liquidation.
However, to find out more information will mean paying a fee and there are two main services, one which allows for the purchase of a company?s historical information, including accounts and annual returns.
A more sophisticated and expensive services permits the download of company documents direct to a computer and it is also possible to set up a subscription of email alerts for any changes to the company being investigated.
An easier and simpler way of carrying out a credit check, however, is to use a specialist company that offers an all-in service that allows companies to protect their business and manage credit risk and uses leading leading credit checking agencies that update their data continuously.
A specialist company offering business credit reports usually also offers a monitoring service on the company about which information has been requested and will alert its client if credit facilities have been withdrawn.
When complex construction projects can fall through with little warning architects would be sensible to ensure they have protected their businesses as much as they can to prevent the worst from happening and putting their own company under pressure.
Good Business and Finances creates bigger bank accounts.
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