Spotting the warning signs
Whether you are concerned for your business' health, or that of a customer or client, many of the early-warning signs of financial difficulty are the same. The following are typical signs of a business facing a potential financial crisis:
- Deteriorating debtor collections
- Increasing WIP value that is not billed on time
- Cash at bank is reducing/the overdraft is steadily increasing
- Rising stock levels and static/deteriorating sales
- Slow or late payment of suppliers' invoices
- Clearing debts by lump-sum payments on account
- Increasingly making payment by post-dated cheques
- Leave paying old invoices until you need delivery of a new order
- Using disputes to delay payment to suppliers
- Receiving an increasing number of final demands and writs from suppliers
- An ever-widening search for new suppliers who will make more credit available
- Escalating VAT and PAYE arrears
- Receiving a statutory demand for payment
If any of the above applies to your business, or that of a customer or client, you should seek urgent professional advice from a licensed insolvency practitioner. If advice is taken early enough, it may still be possible to save your business, or prevent a potential bad debt. It could also avoid the consequences of potential personal liability of directors for allowing their company to trade on without reasonable prospect of avoiding insolvency.
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