IS YOUR BUSINESS SHOWING “WARNING SIGNS” OF A BUSINESS IN TROUBLE?
The benefit of hindsight is a wonderful thing. It often helps to get the perspective of a Chartered Accountant or Business Advisor. An insolvency practitioner (liquidator) came up with a list of warning signs of trouble in a business.
We all want to stay positive and not talk ourselves into a recession, but it pays to be realistic. These signs are not meant to alarm, but to alert you to the need for some proactive steps, rather than waiting until it’s too late.
Here are the ’Business-in-Trouble’ Signs
- Your overdraft is near or at its limit for a significant period of time.
- Difficulty meeting your suppliers payment terms.
- Your staff are spending time on telephone with suppliers about outstanding payments.
- Your suppliers are threatening COD terms or stop supply.
- Your suppliers are putting your business last for service priority.
- Your cheques start to become dishonored by your bank or if using electronic payment methods, your payments do not process due to being at your bank limits.
- Your suppliers issuing demands or threatening legal action.
- Your Creditors balance increasing whilst debtors and inventory/WIP remaining static.
- You experience difficulty paying GST and PAYE tax deductions to the Inland Revenue Department.
- You have hesitation in lodging GST returns when they fall due as funds being required elsewhere in business.
- You start to receive correspondence from Inland Revenue Department about outstanding GST lodgements or overdue payments.
- You are needing to sell capital assets to fund ongoing trading.
- You are unable to place orders for stock due to cash constraints.
- Staff morale down due to perception of Cash flow difficulties.
- Higher than normal staff turnover as a result of above.
- Bank requiring more information or security in order to maintain credit facility as you have now triggered warning signals at the bank.
- You start to put off costs of maintenance on equipment which could cause an interruption to running your business.
- Your bank has suggested refinancing.
- You become behind with insurances e.g. Accident Compensation payments, product and public liability.