What are the main causes of business bankruptcy? (And how to prevent it)

What are the main causes of business bankruptcy? (And how to prevent it)

What are the main causes of business bankruptcy? (And how to prevent it)

The main cause of business bankruptcy is the mismanagement of funds. This can happen in a number of ways, such as overspending on inventory, not keeping track of expenses, or taking on too much debt. Businesses can also go bankrupt if they make poor investment choices or are unable to keep up with the competition. 

As a business owner, there are a few things you can do to prevent bankruptcy for your business.

Have a good handle on your finances.

First, make sure you have a good handle on your finances. Keep track of your income and expenses, and make sure you are not overspending. This means knowing how much money is coming in and going out and keeping track of your assets and liabilities.

Have a good business plan in place.

It is also important to have a good business plan in place. This will help you make sound decisions about where to invest your money and how to grow your business. In other words, setting realistic goals and having a clear idea of how you will achieve them. You should also have a contingency plan for dealing with unexpected expenses.

Know your break-even point.


It is important that you know your business’ break-even point to avoid bankruptcy. This is the point at which your income covers your expenses. Make sure you have enough sales to cover your costs so you don’t end up in the red. 

Avoid fraud.


Another way to prevent business bankruptcy is to avoid fraud. This includes embezzlement, false advertising, and insider trading. If you’re tempted to commit fraud, remember that it’s a crime and that it can put a lot of financial strain on your business, which can eventually lead to bankruptcy. Another critical part of avoiding fraud is ensuring that you can trust the people who work for you.

Always be prepared for the worst.

Have a contingency plan in place in case your business does not do as well as you had hoped. If you find yourself facing bankruptcy, there are a few things you can do to try to salvage your business such as negotiating with your creditors and selling off some of your assets to raise funds.

Seek professional help.

If your business is struggling financially, it’s important to seek professional help before it’s too late. A professional can help you create a budget, track your spending, and find ways to cut costs. If you’re looking for an expense management consultant for your business, contact E3 Bookkeeping to learn how we can help you and your business meet your financial goals. 

Business bankruptcy is a scary proposition, but it’s something that many business owners have to face at some point. While there’s no guaranteed way to prevent business bankruptcy, these steps can help you to reduce the risk of it happening to you.


E3 Bookkeeping

We are the best in the Oklahoma market centering our operations in south Tulsa. E3 Bookkeeping makes sure our clients have the best books at the end of the month and the end of the year. Our team is experienced, prepared, and most importantly, looking out for you and your business.

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