Self Assessment

Companies should have the following mechanisms in place so that directors would be in a position of being alerted as early as possible if there is likelihood that the company may be about to face financial distress. These tools, amongst others, should enable directors to determine whether it is viable, or otherwise, for the company to continue trading:

• The continuous and consistent maintenance of adequate accounting records;

• The preparation of accurate management accounts on a regular basis;

• Regular budget and cashflow projections to ensure budgets are maintained and cashflows meet creditors;

• An analysis of the collection of debts and the payment of suppliers;

• The creation of an adequate system to ensure all ongoing tax is remitted.

The questions contained in this self-assessment test should serve as indicators of the entity’s financial viability. Being alert to these indicators will facilitate an ongoing critical analysis of the business of the company by the directors and could help them avoid committing a breach of duty if financial difficulties do arise.

The results of this self-assessment are dependant on the data supplied by the company. Such results are to be considered as merely indicative and by no means conclusive evidence of the company’s viability. In circumstances where the directors have reasonable cause to believe that a company is, or is likely to be, unable to pay its debts, the directors should consider seeking professional advice. A full list of accredited Insolvency Practitioners can be found here.