- Business bankruptcies are a potential business risk, with over 13,000 filed in 2022.
- Common causes include employee injuries, fire accidents, cyberattacks, and product liabilities.
- Insurance is essential to cover losses from any unfortunate events.
- Cash flow management helps identify potential issues quickly.
- Proper risk management strategies are necessary to protect the business and avoid bankruptcy.
Starting and running a business is not an easy task. There are several risks involved that every entrepreneur should address. These risks range from natural disasters, theft, fraud, and lawsuits to accidents that impact your business. With the increasing number of accidents and economic pressure, protecting your business should be your top priority. Here’s a look into business bankruptcies in the country, some leading reasons why businesses go bankrupt, and what you can do to prevent your business from experiencing such a problem.
Business Bankruptcies in The U.S.
It’s estimated that there were over 13,000 filed business bankruptcies in 2022. This was a decrease from the previous years, but it’s not something to be celebrated. Business bankruptcies can significantly impact the economy as they lead to job losses and disruption of services.
Leading Reasons Why Businesses Go Bankrupt
There are several reasons that businesses go bankrupt. Here are some of those reasons:
Employee Injuries
One of the most common accidents that can happen in a workplace is employee injuries. It costs businesses billions of dollars annually. This can result from slips and falls, malfunctioning equipment, or repetitive motions. As a business owner, taking the necessary measures to avoid employee injuries is essential. You can conduct regular safety training, implement safety guidelines, and provide appropriate equipment. Failure to do so may lead to lawsuits and compensation claims, especially if the employees cannot continue to work.
Fire Accidents
Fire accidents can happen in any business premises, regardless of the industry. Some common causes of these accidents are electrical faults, gas leaks, and human errors. Your business can suffer significant losses if you do not have adequate fire safety measures. You should conduct regular fire drills, install smoke detectors and extinguishers, and train your employees on safety protocols.
Cyberattacks
In this digital age, cyberattacks are getting more sophisticated, posing a significant business risk. These attacks can result in data, money, and valuable information loss. Common types of cyberattacks include phishing, hacking, ransomware, and malware. You can protect your business by implementing strict cybersecurity strategies. This can include installing firewalls, encrypting sensitive data, using strong passwords, and training employees on online safety.
Vehicle Accidents
If your business involves transportation, you may face the risk of vehicle accidents. These can cause severe damage to your vehicles, cargo, and even human lives. To prevent these accidents, you should regularly maintain your vehicles, provide safety training to your drivers, and ensure they comply with traffic laws.
Product Liability Accidents
If your business manufactures or sells products, you may face the risk of product liability accidents. This can happen if the products fail to meet the required safety standards or if they cause harm to your customers. As a business owner, you should ensure your products are safe, provide adequate warnings and instructions, and have suitable insurance coverage.
Preventing Business Bankruptcies
Thankfully, there are various ways you can prevent bankruptcy. Here are three effective ways:
Insurance
You must invest in insurance. This will help you cover losses in case of an unfortunate event. Depending on the type of business, you should take out property and liability insurance, cyber insurance, vehicle accident insurance, workers’ compensation insurance, and more. Additionally, you must get policies from a company that uses reliable Insurtech solutions. This platform allows consumers to manage their insurance policies when they need it, leading to a more efficient turnaround on your policies when you need it.
Cash Flow Management
Cash flow management is a primary key to avoiding bankruptcy. You should regularly monitor your cash flow, track expenses, and revenue, create accurate financial forecasts, and maintain appropriate cash reserves. This will help you identify potential issues early and take corrective action before it’s too late.
Risk Management
Proper risk management is essential for preventing business bankruptcies. You should assess all the risks that may affect your business, develop strategies to mitigate them, and implement adequate controls to ensure proper compliance with safety regulations. Additionally, if something goes wrong, you should have an emergency response plan ready to help minimize losses and keep operations running smoothly.
Bankruptcy can have a devastating impact on your business. However, if you take the necessary steps to protect your business, it will be better prepared to handle any risks that come its way. Start by implementing proper risk management strategies to keep your business safe. Doing so will help you avoid bankruptcy and keep your business strong for many years.
