It’s been a tough year for everyone, with many businesses fighting for survival as a result of the Covid-19 pandemic.
However, if your business is facing financial difficulty, recognising that your business is in trouble could be one of first steps towards turning things around.
My business is struggling – what should I look out for?
All too often, business owners bury their heads in sand and don’t take action soon enough. But the truth is that businesses don’t usually fail without warning – and if you learn to spot the warning signs, you could be able to rescue your business and turn things around.
So, if you’re a company director feeling nervous about your company’s future and finding yourself thinking “my business is struggling,” read on to discover the key things to look out for and what to do next.
1. Poor management of cash flow
We all know the saying cash is king – and when it comes to running a business, it’s absolutely true. Poor cash flow management is always a bad sign. It is often the prime culprit in business failure, and more often than not, a constant lack of cash is the first sign that things are going wrong. Of course, all businesses suffer periodic dips where cash is tight.
But if cash flow is continually a problem, then your business could be in trouble. Basically, if your business is continually spending more than you earn, you’re going to run into problems sooner rather than later.
So, if you’re struggling with cash flow, discover how to solve your cash flow problems in this blog.
2. You can’t pay your bills on time
If your cash flow cycle slows down enough that you’re no longer able to pay your bills when they are due, it’s a pretty serious warning sign that something is very wrong with your business.
Everyone misses a payment sometimes or can forget to pay a bill on time, but if the frequency with which you are missing payments is increasing and you are starting to get angry letters from creditors, it suggests your business is heading towards insolvency.
What’s more, the moment demand letters from HMRC, landlords, utility companies and suppliers start to pile up, chances are, they are likely to take action against your company soon.
3. Your clients don’t pay you on time
But it’s not just about you paying your bills on time. If your customers make late payments, it starts a chain reaction which could eventually halt your entire company. Of course, one or two late payments here and there isn’t necessarily a big problem.
However, regularly not getting paid on time can not only have a significant effect on your cash flow, but it also indicates sloppy collection policies and might be a sign that something fundamental isn’t being addressed.
4. The bank won’t let you borrow more money
Is your overdraft always at the limit? Has your bank refused to increase it? Or have they refused to provide a loan? If a financial institution halts the flow of capital, it basically means that they no longer have faith in your company that they are going to get it back.
Since lending is based on a combination of credit scores and information about past lending history, the bank’s judgment is often fairly accurate. And unfortunately, if you can’t gain more finance, it could end up putting even more strain on your cash flow, making things even more challenging.
5. You haven’t filed annual accounts and reports
If you haven’t filed your company’s accounts on time at Companies House and have incurred a penalty or you haven’t filed your company’s annual return, it could be a sign that trouble is ahead.
Although the late filing of accounts might be due to a valid reason, it is also often because a company doesn’t have enough money to pay accountants or because it is unable to provide full and proper financial information to enable accounts to be prepared.
Either way, both of these are warning signs that your business is in trouble.
6. Your creditors are threatening legal action
Legal action can actually increase the amount needed to be paid because as well as claiming interest, the creditor might also be able to recover legal costs – which is why most businesses try to avoid matters getting to this stage.
If your company has a number of unsatisfied judgments against it and the amounts of judgments are increasing, it’s the final warning that your business is in trouble. It suggests that you are really struggling to pay in full and on time – which means you need to take action as soon as possible if you want to rescue your business.
My business is struggling – how McAlister & Co can help turn things around?
If your business is in trouble, burying your head in the sand isn’t an option. So, if any of these warning signs are ringing alarm bells, it’s time to act fast if you want your business to survive.
As a leading insolvency practitioner and business turnaround expert, at McAlister & Co we can help you to recover from financial difficulty. Possible actions you can take to reverse the situation include:
- Generating new revenue
- Cutting costs
- Negotiating with your creditors
- Restructuring your company
- A Company Voluntary Arrangement
Remember, the sooner you seek advice, the more options you will have available – so contact McAlister & Co today to find out if you can turn things around.