Proactive strategies from Rodgers & Co to build resilience and protect your business.
Business liquidation often comes as the end of a series of compounding problems—not just one mistake. Many businesses that go under are profitable on paper but face issues like poor cash flow, customer concentration, or lack of early warning systems.
At Rodgers & Co, we help business owners stay one step ahead. Here are 10 key strategies that can help your business avoid liquidation.
1. Work with your accountant on cash flow management
Cash flow is the lifeblood of any business. Unlike profit, which is an accounting construct, cash flow reflects the actual movement of money in and out of your business.
Understanding free cash flow—what’s left after all operating and capital expenses—lets you know how much working capital you really have. Accountants can help forecast and model different cash flow scenarios, ensuring you have buffers and strategies in place when things tighten up.
2. Revise your payment terms
If your clients take 45+ days to pay, while your suppliers expect payment in 20 days, you’ve got a cash flow squeeze. Reviewing and adjusting payment terms ensures you’re not bankrolling your clients at the expense of your own solvency.
Use tools like accounts receivable aging reports to identify late payers. Consider offering small discounts for early payments or introducing automated reminders to encourage timely settlements.
3. Rethink your staff payment schedule
Weekly wages might be the industry standard, but if your cash inflows arrive monthly or “20th of month following,” you may be setting yourself up for a shortfall.
Talk with your accountant about aligning payroll cycles with revenue timing. Even moving from weekly to fortnightly payments (if contractually and legally permitted) can improve cash flow stability.
4. Strengthen customer relationships
Building trust with your clients not only helps you retain business but also opens the door to honest financial conversations. If a client hits a rough patch, they’re more likely to be upfront, allowing you to work out a solution before invoices go unpaid.
Goodwill also increases client lifetime value. Loyal clients are more likely to refer others and to stick with you during pricing or service changes.
5. Set up Gazette alerts for client financial distress
Clients don’t always tell you when they’re struggling. By subscribing to Gazette notices or business credit alerts, you’ll receive updates if any of your customers are facing liquidation, receivership, or court action.
This early signal allows you to pause additional credit or renegotiate terms before you’re left chasing unsecured debts.
6. Diversify your client and industry exposure
Avoid becoming overly reliant on a single client or sector. If your client mix is heavily skewed toward industries facing economic headwinds—like construction, retail, or hospitality—you increase your vulnerability.
Diversification spreads risk, helping to stabilise income during market downturns. Aim to monitor the revenue share by sector and flag when a single industry accounts for more than 30–40% of your turnover.
7. Review your business debt structure
High-interest or short-term debt can quickly become unmanageable, especially during periods of reduced income.
Work with your accountant or a business advisor to restructure existing debt. This might involve consolidating loans, extending repayment periods, or negotiating lower interest rates. Reducing your monthly debt service obligations can free up working capital and provide valuable breathing space.
8. Build an emergency cash buffer
Unexpected events—like late payments, legal disputes, or economic shocks—can derail even healthy businesses.
Aim to keep at least 2–3 months’ worth of fixed expenses in a reserve account. This buffer gives you time to react, pivot, or restructure if something goes wrong—without having to rush into insolvency or fire sales.
9. Monitor key financial ratios regularly
Don’t wait for year-end financials to assess your business health. Establish a habit of reviewing monthly management reports, including:
Current Ratio (liquidity)
Debtor Days (collection efficiency)
Gross Profit Margin (profitability)
Working Capital Ratio
These indicators provide early warning signs when things are going off track. At Rodgers & Co, we help clients interpret and act on this data in real time.
10. Run scenario planning and stress testing
Planning for the worst doesn’t make you pessimistic—it makes you prepared.
Run stress-test scenarios such as:
What if your top client cancels?
What if interest rates increase another 1%?
What if you’re forced to reduce headcount?
By modelling potential shocks before they happen, you can put safeguards in place—like insurance, alternate funding, or pivot plans—to mitigate their impact.
Final Thoughts
No one starts a business expecting it to fail. But without the right systems, awareness, and financial planning, even strong businesses can face liquidation.
At Rodgers & Co, we believe in building businesses that are not just profitable—but resilient. If you want help reviewing your financial position or putting a survival strategy in place, we’re here to help.
Frequently Asked Questions About Business Liquidations
What is the difference between profit and cash flow?
Profit is an accounting measure of earnings, while cash flow refers to actual money moving in and out of the business. A company can be profitable but still experience cash shortages if payments are delayed or expenses are mistimed.
How can payment terms affect cash flow?
If customers take too long to pay and suppliers require quick payment, your business could run into cash flow problems. Adjusting your terms and monitoring debtor days helps maintain liquidity.
What are Gazette alerts and how do they help?
Gazette alerts notify you when a company enters liquidation, receivership, or legal proceedings. This allows you to proactively manage financial exposure to at-risk clients.
How much should I keep in an emergency cash buffer?
It’s recommended to hold 2–3 months’ worth of fixed business expenses in reserve to handle unexpected events without risking insolvency.
Why is client diversification important?
Relying too heavily on one industry or client increases risk. If that industry faces economic trouble, your business could suffer too. Diversifying helps spread the risk.
