The phrase “the writing is on the wall” is often used by onlookers who can see what is coming before those involved can. In commerce, it is used as a warning sign that a business is failing. As a company director, how do you really know if the writing is on the wall for your business?
When you’ve spent time building your business, invested blood, sweat and tears into creating your dream, it can be hard to be objective when things aren’t going so well.
Here are 7 key warning signs your business is in immediate danger:
1 – Revenue is reducing
No business can survive for long if it isn’t making enough sales to cover costs and re-invest money back into the business to fund growth. It may not be too late to turn it around, but you need to take decisive action now.
2 – You can’t pay your bills on time
Even a profitable company can run into trouble if they have cashflow issues. Failing to keep a tight control on money invoiced and due into the company or holding too much stock are common ways businesses end up having insufficient cash to meet their commitments. If a business must borrow from the bank simply to pay its short-term debtors, this is a clear warning sign.
3 – Your business is haemorrhaging cash
Are you and or other directors propping up the business by “cashflowing” the business perhaps by using personal credit cards and or loans? Are checks in place to ensure sales targets are being met? Cost reduction efforts need to be in place as “cashflowing” is an unsustainable position, and incredibly difficult to recover from.
4 – You are not paying yourself a salary
Again, an unsustainable situation. You did not go into business simply to provide employment for others, so if you cannot afford to pay yourself, you need to have milestones to indicate when you expect to be able to draw a salary.
5 – You are doing the same thing but expecting a different outcome
A business that does not innovate and is constantly making the same mistakes over and over is in trouble. This could be due to poor leadership, inaccurate or insufficient management information or simply because you can’t see the wood for the trees anymore.
6 – Your staff are no longer loyal
When the staff can see the writing on the wall before you can, this can manifest itself in higher staff turnover, increased sickness absence, insubordination, lack of motivation and even theft from the business. These are key indicators of a problem
7 – Your wellbeing is suffering
Managing a failing business is stressful and you are unlikely to be feeling on top of the world. There are impacts to your physical, emotional, and financial health. You may not be getting enough sleep, be suffering from anxiety and/or depression and you might be struggling to cover all your personal living expenses.
Next steps if you believe your business is failing – mitigating risk
If any of the above sound familiar and you feel like you are walking on quicksand, the most important thing you can do is get expert help now. This might be your accountant or business advisor. There are important steps you must take to ensure you are on the right side of the law, and mitigating any risks to your personal position.
They should look to “tidy up” matters and present all the options and working together, look to resolve the situation.
Appropriate actions to consider would include:
- Business turn-around plan
- Restructure payments to the bank and suppliers
- Business restructure
- Business closure
- Assist in the sale of business assets, repaying appropriate funds to the director
- Safeguarding personal assets
- Providing expert advice in the best interest of the director
Finally, it is vital to be aware that an Insolvency Practitioner has a legal duty to work on behalf of the business’ creditors; they do not act for the directors of the business, even though the directors appoint them. Consider engaging with a Debt Solution Company first.
Working with a Debt Solution Company is an option
Another option is to speak to Debt Solution company who will work with directors to select and engage with an Insolvency Practitioner and secure the best outcome possible. They will have the directors back, and take a holistic view, not just of the business but also of director’s debts including personal guarantees given during the course of business.
When you have the right people working on your side, it reduces your stress and anxiety. You’ll be able to take decisions with a clear head, knowing you are fully informed and supported.
So, if you feel the writing is on the wall for your business, get in touch with your trusted adviser today.
HB Accountants would like to say a huge thank you to Priti Shah of Lightside Financial who helped with this blog. As experienced specialists in debt solutions for Company directors and Individuals, Lightside Financial prove there is life after debt – click here to email Priti Shah.
Lightside Financial is authorised and regulated by the FCA. FCA No. 676943
HB Accountants are accountants for business. For financial and accounting guidance and support, please contact Keith or Karen. We’re working hard for all our clients to help you make the right decisions.
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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above