Some business warning signs and what to do when you see themFebruary 18, 2015
Just three years after it was founded, FedEx was struggling burning close to one million dollars a month. At its most desperate, the delivery company had just $5,000 in the bank, substantially short of their $32,000 monthly fuel cost.
So what did founder Fred Smith do? He headed to Las Vegas and stuck everything the company had on red. Seriously, this happened.
Thankfully, Smith’s bet paid off and he avoided a very public bankruptcy. He won $27,000 that night, giving the company enough money to keep his fleet on the road and in the air.
What does FedEx look like 43 years later? It employs close to half a million employees and makes tens of billions of dollars.
But why am I talking about FedEx? Well, it’s definitely not to recommend Blackjack as a legitimate fundraising tactic!
My point here is that all business experience struggles and challenges. The thing that really matters is how you respond to those challenges. And the first step to positively responding to business challenges is realising that you are in trouble. In this blog, I'll look at several key warning signs. If any of the signs sound very familiar, I strongly recommend you get in touch with our team today.
Warning signs to watch out for
- Running out of cash. It isn’t just loss-making businesses that go bust, keep an eye on your cash flow and not just your profit and loss forecasts.
- Significant growth in your business usually puts pressure on your cash flow. Can you cope with a sudden boom?
- Loss of important clients or delays in payments on large contracts. Do you have the buffer to carry you through?
- Increasing requirement to fund the business from your personal wealth.
- Overdraft facilities close to bursting.
- Struggling to pay VAT and PAYE in full and on time.
- Supplier and creditor pressures.
- Requirement to sign personal guarantees.
- Deteriorating balance sheet position.
- Increasing losses.
If you are experiencing any of the above, contact our team right now! Our initial consultation is always free and is completely confidential. You really have nothing to lose!
Whilst striving for success and growth directors should bear in mind the risks and ensure they are protecting both the business and themselves.
Every director is expected to understand their Company’s current financial position (regular, up to date and accurate management accounts and forecasts are vital). You have a duty of care not only to the Company but also to all stakeholders including your suppliers and creditors.
When a Company is struggling for survival you have a responsibility not to worsen your creditors’ position.
Potential for personal liability if continue to trade on blindly and unreasonably.
Best defences to protecting your business
Many viable businesses fail because management stick their head in the sand hoping that things improve by themselves. Here's how you protect your business.
- Recognise the warning signs early and take action.
- Have accurate and current financial information on which to base your decisions (the strategic ones being recorded in your Board Minutes)
- take professional advice from your solicitor, business advisor or insolvency practitioner.
What can 180 Advisory Solutions offer?
For any business facing difficulties, knowing what the options are is fundamentally important. Taking advice early is the key as the number of options available can diminish over time until there is no option other than insolvency. We have years of experience of many different businesses and difficult situations while often business owners and managers may just have experience of the one business they are in. It can be a lonely place running your own business when facing trading problems. Lean on us for help and advice.
- Our initial meeting is entirely free and completely confidential
- We provide assistance with preparing a business plan aimed at securing/maintaining funding or to turn your business around
- You gain an independent view on your trading and forecasts
- Our experts can assist in negotiations with HMRC, suppliers and other stakeholders
- We'll take a look at your cash flow management
- Our business experts can advise you on your responsibilities as a director to minimise risk of personal liability
- Advice on funding options
- Company Voluntary Arrangements (“CVA”)
- Should formal insolvency be unavoidable we can help you through the process and advise on the possibility of preserving value in the business for you going forward
Contact us today for a free no obligation conversation
Telephone: Barry Stewart or George Lafferty on 0141 353 6203
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