TOP TEN TIPS
James Sleight ,of Geoffrey Martin & Co, on spotting the warning signs of a struggling business
1: If your suppliers are tightening your credit terms, pressing for cash or even threatening enforcement, this is a key warning sign that your company is struggling. Having a good relationship with your suppliers is key.
2: Be upfront with suppliers if you’re having short-term difficulty in meeting bills; most will be accommodating. Problems, and legal threats, usually start when suppliers haven’t heard back from you and are worried that they won’t get paid at all.
3: As well as suppliers, you need to be sure that you pay your VAT and PAYE; again, be upfront with HMRC and you’ll usually be given some leeway on payments.
4: Where extended terms are agreed make sure you don’t over promise what you can deliver otherwise you will quickly erode away any confidence with your key trading partners.
5: On the flip side, not getting timely payment debtors can also be a clear sign that your business is struggling.
6: However, if your customers don’t pay, that makes it difficult to pay suppliers, who may restrict service to you, which in turn leads to problems. You need to know exactly who your debtors are and how long they have owed you money for; this makes it easier to chase.
7: If you don’t understand why restrictions are taking place sometimes it is a good idea to have your credit rating checked to see what others can see about your business profile.
8: Many owners of new and growing businesses don’t have formal management training. Sometimes this means that the key members in a business may not have the skills needed to run a growing business, which may lead to issues
9: Have a look at bringing outside help. This could be as simple as hiring a bookkeeper to focus on the key, regular finance tasks, or perhaps bringing in a nonexecutive director who can provide a strategic overview.
10: Perhaps the biggest warning sign is if you consistently owe more than you are owed,