If you cannot pay your debts when they become due, or if the amount you owe is greater than the value of your assets then by definition you are “insolvent”. The first of these two is referred to as ‘cash flow insolvency’, and the second is ‘balance sheet insolvency’. Many companies believe that because they are profitable, they are going to be solvent; however this isn’t always the case. For example, if a key customer fails to pay their debt to you, you may not be able to pay your debts. Some businesses fail to keep an eye on their cash flow when striving for growth, over-investing in machinery/ equipment and creating an insolvency problem, despite their business being healthy in all other areas. The key to addressing the problem of insolvency, is recognising the signs and getting proper advice at the earliest stage possible. By taking advice as early as possible you limit exposure – continuing to trade and believing the business will turnaround might not be the answer – it quite often amplifies the problem.