Establishing whether there is a problem
There are many symptoms that could suggest that there may be a problem. If some of the following sound familiar there may be a problem.
Funding
The business bank account is regularly or always at its overdraft limit;
Cheques regularly bounce or standing orders and direct debits fail due to insufficient funds;
The bank seems to be always asking for more information;
The funders of the business (banks, invoice discounters, factoring companies, etc.) are pressurising to reduce the facilities;
The banks suggests that the business moves to factoring or invoice discounting rather than an overdraft facility;
Invoice discounters suggest a move to factoring;
The funders ask for personal guarantees and/or personal security (e.g. second charge over personal property);
The funders request additional charges/security within the business or against other businesses;
The business invoice discounts or factors but there are constant issues regarding retentions, disallowed debts etc.
Creditors
Constantly trying to avoid speaking to creditors;
Constantly thinking of excuses for non-payment of debts; cheque in the post, authorised signatories on holiday, computer errors, lost in post, payment run tomorrow, etc.
Creditors threatening action or successful CCJs entered against the business;
Regularly being placed on stop by suppliers;
Frequently changing suppliers due to supply problems;
VAT returns not completed or payment not made;
Outstanding PAYE and National Insurance;
Unpaid pension contributions;
Problems meeting the rent;
Threats to remove goods or get the bailiffs in;
Not sure how much the business owes;
Accounting
Late management accounts, inaccurate or not prepared;
Business appears profitable but cash flow tight;
Accounting function spending most of its time 'fire fighting' and financial director unable to make strategic decisions due to constant cash management;
Late accounts;
Customers
Frequent quality issues
Highly dependent upon a small number of customers
Constant pressure on reducing prices and extending credit periods;
Employees
Health and safety issues;
Defined benefit pension scheme;
High levels of absence due to sickness/stress;
High levels of staff turnover;
Loss of key staff;
Personal
Dread coming in to the office;
Avoid opening the post or answering the phone;
Not taking a salary out of the business;
Investing personal resources in the business and borrowing against home;
Unable to take holidays or spend holidays on phone to the office;
Unsure what to do;
Situation at work affecting personal life.
If any of these are familiar it is important that advice is sought as soon as possible. The earlier the problems are considered the more likely that the business can be rescued.
