Dangers of overtrading as restrictions lift

With the further easing of Covid-19 restrictions, the signs of economic recovery are encouraging. However, business owners should err on the side of caution to avoid over-trading. As the danger of an overenthusiastic approach to getting back to business as usual may come with a hefty price.

Debt bubbling under the surface

While many firms now expect an economic boost, recent figures for England and Wales exposed a month on month rise in corporate insolvency cases from 685 to 992. Meaning nearly three-quarters of a million UK companies report being in ‘significant financial distress’.
Those that have weathered the difficulties of the last year may fall into the trap of attempting to regain their financial liquidity as fast as possible. However, by straining resources too quickly, businesses are likely to become insolvent despite recovering from the lockdown. The automotive, retail and foodservice sectors expect to be hit the most by the pandemic.

Potential dangers of overtrading

Dangers of overtrading can have long-term consequences for businesses and business owners. From delivering sub-standard goods or services to failing to deliver on time, coupled with the threat of late/non-payment, huge overheads, increased stress levels, and even insolvency.

Bulletproofing the business

Consumers may be ready to release their pent-up demand, however, companies should focus on sustainable reopening. Adopting agility coupled with strong grasps of cash flow to cover the total cost of reopening and restocking will be necessary to prevent them from sinking.

Seeking advice

If you are worried your business is overtrading or you have concerns about your company’s finances, you should seek expert advice as soon as possible. Contact us for a free consultation on 0800 118 2948.

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