Author: Keith Steven

Bank –

• Your overdraft is always at the limit?
• Your bank always wants more information.
• Your bank has returned cheques.
• Your bank has refused to increase your overdraft.
• Your bank refuses to provide a Loan.
• Your bank has refused to provide an Enterprise Financial Guarantee loan
• Your bank has asked for facilities to be reduced.
• Your bank wants to introduce investigating accountants
• Your bank asks for increased security.
• Your bank wants personal guarantees.
• Your bank wants to increase personal guarantees.
• Your bank wants security against your own personal property.

Reporting – warning signs

• You have not filed the company’s accounts on time and have incurred a penalty.
• You have not filed the company’s annual return

 

Creditors – warning signs

• Cash flow always tight so paying creditors is difficult.
• Inefficient production – cant get stock because you cant pay creditors on time.
• You can’t get stock on time because you miss deadlines for payment of supplier accounts.
• You cannot get new credit.
• You cannot extend existing credit.
• The company’s creditor days growing – i.e. divide the amount of money you owe creditors by the sales per annum and multiply by 365.
• You don’t meet agreed payment terms.
• You have lots of failed deals with
• You have lots of red warning letters.
• You have had lots of legal actions.
• You are “Peter & Pauling” using lots of suppliers and spreading credit around.
• You are always fighting creditor fires and having to handle creditors calls every day.
• Your suppliers can obtain trade insurance against your company.
• You have had visits by Sheriffs or
• You are having HMRC payment problems

 

Debtors .

• They just don’t pay on time.
• You don’t know what your total debtors are.
• Debtor days are over 85 days: divide the amount of money you are owed by debtors by the sales per anum multiplied by 365.
• Your company has concentration in 1 or 2 major customers (debtors).
• Your accounts department only invoices periodically. You do not have a dedicated debtor collection function.
• You don’t want to issue too many credit notes – although you know the goods supplied have been faulty, returned or under agreed quality.

 

Factoring Companies

• I don’t know how much they owe me.
• I don’t know how much the company owes the factor.
• Your factoring company is reducing your advance.
• They don’t seem to understand my business.
• We can never get enough advance against my invoices.
• They are advancing 75% against my invoices but disallowing lots of invoices.
• They are too expensive.
• They claw money back from me after the debtor has not paid in less than 90 days.

 

Management Warning Signs

• Autocratic leadership is it one person running the show?
• The management team cant perform because of:
  • Firefighting – you never get your work done;
  • Lack of information or wrong information;
  • Concentrating on non essential issue;
  • Senior people seem paralysed into inaction.
  • Are you “compartmentalising” problems. in other words do you deal with one creditor problem and ignore others.
• Do you blame the:
  • • Bank;
    • Creditors;
    • Debtors;
    • Accountants;
    • Advisors;
    • Everyone!!
  • You don’t have a business plan.
  • You don’t have regular management meetings.
  • You don’t have board meetings.
  • You don’t like changes.
  • Directors are taking big salaries and expenses.
  • You ignore advice of others and professionals.
  • You have an overdrawn directors current account

 

You and the management don’t know

• Gross Profit – accurately.
• Costs – accurately.
• Sales per month / per annum.
• Orders taken.
• Enquiries quoted for.
• Bank balances.
• Where 80% of work comes from.
• Where 80% of profit comes from.
• What your accounts say they are “wrong” usually.
• Your market what are your competitors, products and threats?
• The Key Statistics of the business:
  • How many units of your product you make per day?
  • At what cost?
  • How many units you need to make to break even?
  • How many enquiries do you need?
  • How many enquiries do you convert into sales?
  • How many people it takes to make this product?
  • What is your sales performance compared to last year, last month, budget?
  • What are your costs increases/decreases year on year?
  • How many new customers you have gained this year?
  • How many customers you have lost this year?
  • And why?

 

PAYE (HMRC)

• You are not paying deductions on 19th of the month following.
• You have not filed monthly returns or paid the tax deducted.
• You have had penalties.
• You have entered into deals with the Revenue.
• You have not managed to keep up with these deals.
• You are well behind with tax paperwork this is a failure to maintain a PAYE Scheme.
• Taxes and other social security entry on audited accounts seems high.
• Tax Collector pressing.
• Debt recovery unit dealing with account.
• I’m not that bothered about IR!!

 

VAT (HMRC)

• Not filing returns or paying tax on time.
• Had vat surcharges.
• Doing deals over time with the local VAT office.
• Cannot keep up with deals.
• Cash flow says you can repay far more than profits made.
• Debt recovery unit pressing.
• I’m not that bothered about the VAT!!

These HMRC warning signs are based upon their minimum compliance expectations: if you breach these then they will see the business as insolvent!

 

Other Warning Signs

Yourself

• You feel that you are the only person who can make a decision in the business.
• You cannot stand going into work on a Monday.
• You breathe a sigh of relief when Friday night comes.
• You don’t open your post.
• You don’t take calls from irate creditors.
• You dread the bank calling.
• You cannot sleep.
• You are falling out with those around you: at home; at work.
• You are very lonely at work.

 

Systems Warnings Signs

• You don’t produce monthly management accounts.
• Sage or similar computerized accounts package shows negative balances in liabilities.
• You have a computer generated profit and loss but a handwritten balance sheet.
• GP constantly overstated – you just do not understand why no profits are made from such good gross margins.
• Wastage understated.
• Constant returns, faults disputes with debtors.
• Things always going wrong.
• You ignore the information the systems produce as “it must be wrong” !

 

People

• High staff and management turnover.
• Internal political issues causing difficulties.
• Things always going wrong.
• Your team always seems demoralized.

 

Finance

• Always refinancing assets. No money to pay deposits.
• Just need x,000 to sort this problem.
• The next big sale/contract/debtor payment will sort the problem out!
• You have introduced a number of new financial products to keep going.
• You have borrowed money against your home to fund the business.
• You are not taking money out of the business to live.
• You have used your own money to pay wages pay bills and are just waiting for the next big sales to pay it back.