Managing a business is a complicated process, and determining its financial health isn’t always as straightforward as you might assume. It can be difficult to determine whether your business is just experiencing a temporary slump or whether you may need the services of a bankruptcy attorney. The guide below can help you identify factors that point to a more serious financial situation.

4 Ways to Know When It’s Time to Hire a Bankruptcy Attorney

1. The Business Is Losing Cash Flow

Considering the options presented by federal bankruptcy laws may make you feel as though you have failed, but it may be the only option left to regain financial freedom. The first sign that this may be the case is the size of the business’s cash flow. If you notice a month to month drop in the business’s available cash, or if sales continue to drop routinely, this is a strong indication that you should consider filing for bankruptcy. Initiating the bankruptcy process sooner can help you avoid more devastating losses later.

2. The Business Can’t Make Minimum Payments

Even in lean times, your business should be able to make interest-only payments to its creditors. You can determine whether or not your business can continue to meet these obligations by comparing the business’s assets against its liabilities. In dividing the assets into the debts, you should be left with a ratio that’s one or higher. If you come up with a lower ratio, you will likely need to consult an attorney.

3. The Business Receives an Unfavorable Audit 

It’s a matter of law that public companies must be audited by third-party accounting firms. It’s important to read the auditor’s statement because it will include their evaluation of the business’s cash flow, income ratio, and balance sheet data. It will also include the auditor’s opinion for the future of the business. If the auditor notes that they feel concern for the continued success of the business, you should consider consulting a bankruptcy attorney. This can give you a more detailed evaluation of the business’s financial situation and the legal options available to you.

4. The Business Can No Longer Pay Out Dividends & Other Perks

Finally, dividend payments to shareholders are among the first expenses to be cut for a business in financial peril. If you find it necessary to reduce or discontinue dividend payments to your shareholders, this may indicate the start of continued hardships. If the dividend cuts are followed by cuts to the benefits you offer your employees, your business has already begun a downward spiral, and bankruptcy won’t be far behind.

If you’re thinking about filing for bankruptcy, it’s probably time to talk to a bankruptcy attorney. Located in Ozark, AL, Ray T. Kennington, Attorney At Law has decades of experience in handling bankruptcies for individuals and businesses. They can also provide aid for Social Security and injury cases. A consultation can help you learn more about your options and can be scheduled by visiting them online, or by calling (334) 445-1200.