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When it all starts to go wrong: take advice

So, the money is going out, but it’s not coming in. You have already done as much cost-cutting as is humanly possible and your income streams are drying up.

You owe more money than you have got, and even if the market were to pick up by the end of the year (highly unlikely, say most commentators), it’s a long time to try to stay in business without money coming in.

So, what should you do?

The real worry, says insolvency practitioner Catherine Matthews – who has experience of the estate agency sector and whose firm Tomlinsons (tomlinsons.co.uk) has offices across the UK, including London and Manchester – is when your liabilities outnumber your assets.

Trading insolvently is known as wrongful trading, but if you do it knowingly, then it’s fraudulent trading. So, be careful if you know you’re in difficulties but are tempted to try and trade your way out of the crisis.

The best counsel is not to get to this stage. Matthews says: “Take professional advice early on. You cannot take advice too early, but you can take it too late. Many is the time we could have helped rescue firms if only we’d been called in two or three months earlier.”

Advice should be taken from a licensed insolvency practitioner in any scenario where you are fearful of becoming insolvent.  But insolvency practitioners do not just help clients go bust – the other side of their coin is that they also help business recovery where possible.

It is also worth noting that insolvency practitioners work commercially – ie, for fees. If they feel they cannot extract their fees one way or another, then they won’t take you on.

As a rough guide, for a single-office agency, run as a limited company, it would cost £5-£6,000 in liquidators’ fees to go into voluntary liquidation.

However, as we shall see on Friday with the second in this mini-series, there are different types of insolvency, and much depends on whether your firm is run as a limited company or limited liability partnership, or whether as a sole trader or an old-fashioned partnership.