Author: Keith Steven
- 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
- 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.
- 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:
- 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?
- 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!!
- 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
- 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” !
- High staff and management turnover.
- Internal political issues causing difficulties.
- Things always going wrong.
- Your team always seems demoralized.
- 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.