The cause of the problems
Once it has been established that there is a problem, management (possibly with the assistance of an external party) need to undertake a full review of the business. The purpose of this review would be to determine whether the business is likely to survive and in what form. This review would:
Identify the reasons for the problems;
Establish if these issues can be resolved; and
Establish an action plan to resolve the issues.
Consideration should be given to involving professional advisors at an early stage of this process. This would provide objectivity and may also give the business the best chance of success as often they are brought in once the business has gone past the point of return. It would also assist in protecting the directors from criticism should the business ultimately fail.
Critical to this process is accurate and timely information. Without this it will be difficult for management to make proper decisions and advisors will be able to offer only limited assistance. If the information is not available, for example due to staffing issues, it is vital to re-prioritise staff or bring in external resources.
Once it has been established whether the business has a chance of survival then an appropriate course of action can be decided upon. Some of the possible options are covered in the next section.
