How To Safeguard Your Business From Going Bankrupt

Running a business is easier said than done. It comes with an array of risks with bankruptcy being one of the biggest ones. Even businesses with strong financial backing might find it difficult to sustain at extreme times. Experts prescribe knowing your existing cash flow and a strong intuition to gauge problems before they take a bigger shape. Doing this can keep your business buffered from falling into troubled waters.

This article takes you through some tips which can protect your business from experiencing bankruptcy. 

Tips for Protecting Your Business From Experiencing Bankruptcy

Have separate accounts for personal and business cash flow

Business owners often make the mistake of forgetting the thin line of difference between their business and personal finances. This is why it becomes necessary to have separate accounts for differentiating between the personal and official cash flow of the entrepreneur.

Entrepreneurs who fail to do this might end up using too much business funds for personal purposes. Borrowing funds from one source to subside another might seem like a tempting offer but your ultimate goal here should be to channel the funds in such a manner that it helps in boosting your business growth. Ideally, the business owner should put himself on the company payroll like every other employee. Doing this helps in catering to the capital requirements of the company while offering a bird’ eye view of business drawings. 

Be cautious about their business cash flow

Small company owners need to be cautious about their business cash flow. This becomes especially important if your business is engaged in the activity of offering credit to clients. Such companies need to possess a strong recovery strategy so that every last bit of money owed can be recouped effectively.

Entrepreneurs can avoid borrowing money from other sources by imposing penalties on clients who fail to pay on time, taking halfway payments, and requesting fresh deposits from new clients. If you wish to keep your business buffered from bankruptcy threats, then it is imperative to stay abreast of various debt repayments. Paying off debtors in time is a good practice but you should always prioritize secured debtors having the highest interest rates. Having monthly payment policies in place can keep you safeguarded from having to deal with big payment obligations at once. 

Generate Adequate Funding for Your Business

New businesses might take some time to generate adequate funding. But if the financial problems persist, then you need to work out a new budget that can help your business come out of the struggle. Some techniques you can adopt are reducing overheads like bills, rent, wages, and material usage. Doing this can keep creditors at bay by freeing up more money. Businesses facing a cash flow crisis should postpone luxuries like employee bonuses and explore cheaper workplaces. Drawing lower salaries until the problem passes can also help in dealing with the financial crisis until the problem passes over. 

Inform your creditors about financial difficulties

In general, we tend to stay aloof from our problems until they assume a big stature. However, if your business is experiencing any difficulty, then you should inform your creditors about the same. Explaining the situation clearly can also help buy some time as the creditors might agree to negotiate on the payment terms especially if you have a prolonged business relation. Businesses often fail to gauge their real condition until it becomes too late. In such instances, entrepreneurs can directly ask for help. Sources like outstanding debtors can help in easing your financial trouble to a great extent. Various independent financial advisors and non-profit organizations can help stabilize the finances by exploring various available options. 


Entrepreneurs often make the mistake of availing themselves of further business credit to keep their businesses afloat amongst various problems that might crop up. Credit cards and loans are especially infamous for tying down the business owner in deep debt. Following the tips mentioned above can keep your business safe from the different financial crises and also help build business credit as an indicator of your business prosperity. 

Krystal Morrison

I create this blog to share my daily tips about home improvement, children, pets, food, health, and ways to be frugal while maintaining a natural lifestyle. Interested to be a Guest Blogger on my website? Please email me at: [email protected]

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