7 Signs to Watch for a Business in Trouble
Ruth Duncan, Maxwell Davies Director
If you want to avoid becoming one of the predicted business failures, maintaining a strong grasp of your company’s finances is critical.
But running any business can be a rollercoaster ride of ups and downs – so, how do you know a real red flag when you see it?
I have compiled my top seven indicators that a company’s financial problems have become serious.
1 – The cash flow stops flowing.
“Disruptions to your income can happen very suddenly, or you may notice a steady decrease in sales month on month. Don’t ignore sliding figures; take action to make up the shortfall immediately and avoid an ‘all eggs in one basket’ business model.”
2 – HMRC is knocking on the door.
“If you’re not meeting HMRC’s minimum expectations – such as filing returns on time, meeting payment deadlines and sticking to agreements you’ve made – you need to get professional help.”
3 – There’s no light at the end of the debt tunnel.
“Having creditors is a normal, routine element of running a business until your ability to pay them on time is compromised. If you’re falling behind on payment for goods, services or equipment, being refused credit or robbing Peter to pay Paul without making a real dent in your debt, those are red flags that shouldn’t be ignored.”
4 – Salaries are giving you sleepless nights.
“No business can run without people and if you’re unable to meet your payroll obligations, that could escalate the problem in all sorts of devastating ways. Therefore, payroll must be a priority for you.”
5 – You can no longer bank on your bank.
“Your bank runs your company’s accounts, so it can see the bigger picture, even if you can’t. When your bank starts refusing loans, wanting to reduce your overdraft or asking for more personal guarantees, it means they’re concerned about the health of your business.”
6 – The business is draining your personal resources.
“Running a business does require a lot of personal investment in many ways, but if you’re plundering your personal bank account or putting your home at risk, that’s unsustainable. It’s also a massive warning that you need to turn the tide.”
7 – You’re struggling to deal with the stress and pressure.
“Sleepless nights, anxiety and depression are all entirely natural reactions to a distressing situation, but it cannot be allowed to continue. Seeking expert help to get back on track may not only save your business, it will also help to manage your fears by replacing worry and uncertainty with a solid plan of action.”
It’s important to bear in mind that I’ve also seen businesses recover and return to healthy trading, even when the situation has looked dire. Taking the right action at the right time – usually as early as possible – could be the difference between a business surviving or dying.
There are many options available to help directors recover their businesses, although they can vary depending on the company’s current circumstances.
To help you understand the insolvency decision-making process, we have prepared an Insolvency Options Flowchart exploring the three insolvency routes in an easy to use, jargon-free way. It is a starting point for those business owners who are examining their next moves.
It is not always clear which options are the right ones for your business. The first step is to call us.
Call our Business Rescue Service now on 0800 118 2948
You don’t know what we can do until you ask us!
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