Checklist for insolvency: early warning signals & measures
Checklist: Identify imminent insolvency
Careful monitoring of the financial situation with regard to liquidity (willingness to pay at any time) is essential in order to identify risks at an early stage and to initiate appropriate measures in good time. This checklist serves as a practical tool for systematically reviewing the financial stability of a company. It helps to identify potential liquidity problems at an early stage and to take appropriate measures before a critical situation occurs.
The checklist can be reviewed at regular intervals, for example monthly or quarterly. Ideally, it is integrated into the financial management process (financial controlling). It helps to identify early warning signs, suggest measures to ensure solvency and meet the legal requirements in accordance with Article 725 OR at all times. Through structured documentation and close cooperation with all responsible bodies within the company, financial bottlenecks can be avoided and restructuring strategies can be initiated in good time.
1. ongoing monitoring of solvency
- Regular analysis of the liquidity situation and current liabilities; reconciliation with existing current account limits (seek a discussion with banks if necessary)
- Verification of customer payment practices (debtor management)
- Control of current and future obligations (leasing, loans, suppliers)
- Identification of bottlenecks through rolling liquidity planning
2. Early warning indicators of impending insolvency
- Repeated late payments to suppliers
- Exhaustion or overdrawing of credit limits
- Increased reminder and debt collection costs
- Deterioration of financial indicators (e.g. liquidity ratio, cash flow)
3. Measures to ensure solvency
- Use of a simple financial plan based on monthly data (income/expenditure from ongoing operations, planned investments, planned repayment of debts).
- Prioritize payments to avoid critical bottlenecks
- Negotiating with suppliers over longer payment terms
- Reclamation of outstanding receivables through optimized debtor management, check the assignment of problematic receivables
- use of factoring or alternative sources of financing
- Reduction of non-essential fixed costs
4. Legal obligations of the Board of Directors under Article 725 OR
- Continuous monitoring of the company's solvency
- Take immediate measures to ensure solvency
- Review of restructuring measures and application to the General Assembly, if necessary
- If necessary: review of a potential imminent over-indebtedness problem (OR 725b)
- If necessary: Submission of an application for deferral of estate
- Act with due urgency to avoid liability risks
5. Documentation and internal communication
- Documentation of existing (and possibly newly planned) liquidity management measures
- Logging of liquidity meetings and agreed measures (designation/indication of responsible persons)
- Informing and raising awareness among management and the board of directors
- ongoing coordination with accounting
- Get external support
This checklist does not claim to be exhaustive and is only intended as a guide. It serves as a guide for structured analysis and decision-making. The final assessment and the decision on appropriate measures are the responsibility of the persons responsible for this.
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