There are numerous tell tale signs which point to the fact that a company may be heading into trouble.
The following is a basic check list which should help to determine whether the problems are of a temporary nature or have more serious implications for the future of the company:
The most important element in any business is maintaining a healthy cash flow. It is imperative that a strict control is maintained on all outstanding invoiced amounts.
The value of an efficient credit control system cannot be over emphasised.
Do not focus on generating sales with little margin in the belief that over time things will improve.
Being the “cheapest supplier” will not provide an automatic route to more satisfactory profits in the long term. It is often better to keep your powder dry.
If you are constantly in danger of breaching your credit arrangements with the banks or suppliers this is a clear indication that the company is not trading satisfactorily.
As the company’s financial health deteriorates more and more time is spent focussing on the problems and not enough on to how to position the business for the future.
Particularly for owners of SME’s it is not easy to take the necessary remedial actions and very often this is where an outsider can be of assistance in repositioning the business before it is too late.
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