Your accountant says the business is insolvent.

The accountant raises insolvency

At a routine meeting, an accountant tells a director that the business appears insolvent. The director had expected a discussion about late accounts, not the company’s future. Orders are still being placed and payroll is approaching. The immediate need is to understand the warning, obtain the right specialist input and control decisions while the position is assessed.

Ask for the facts behind the warning

Request the debts, dates, cash assumptions and records on which the view is based. Identify missing information and any disputed balances. Ask whether the assessment concerns a past period, the current position or both.

Do not dismiss the warning because an asset has a high book value. Ask when that asset could produce available cash and whether it is subject to finance. Equally, clarify whether an apparent shortfall results from inaccurate or incomplete records.

Bring in the appropriate specialist

Arrange prompt advice from a qualified insolvency practitioner and legal advice where directors’ duties or proceedings are involved. ASIC’s guidance tells directors to respond to financial difficulty and consider their obligations.

Provide the accountant’s work, bank information, creditor list, contracts and notices. A useful appointment needs current evidence. Tell the adviser about commitments due before the meeting so immediate decisions can be addressed.

Source: ASIC — Insolvency for directors

Control new commitments

Identify proposed orders, customer deposits, borrowing and payments that would change the position. Seek specific advice on what should be paused or controlled. Give the team clear authority limits.

Do not assume that booking an appointment permits trading unchanged. Record the advice and follow it. Preserve accounting records and correspondence, including documents that explain earlier decisions and transactions.

Set a documented next step

Ask which options remain available, what information is missing and when a decision must be made. Record who is responsible for collecting evidence and contacting stakeholders.

Review any personal guarantees or director-specific claims separately. A clear action list will not make the problem easy, but it prevents the warning from becoming another unresolved note while debts continue to grow.

Turn the warning into assigned actions

Obtain the accountant’s evidence and assumptions.

Arrange an urgent specialist review with current records.

Control new commitments on professional advice.

Record the decision timetable, responsibilities and personal-exposure questions.

Call CRP today about an accountant’s insolvency warning and coordinating the next professional steps.