If you’re a business owner facing hard times, there’s no question that you may be feeling stressed, overwhelmed, and more than anything, like a failure.
But, being able to recognize the warning signs of an insolvent business early on is important, and you can then start to decide on the best course of action before things get too serious.
Poor Budgets And Cash Flow Forecasts
If the budget isn’t set out properly and cash flow forecasts aren’t moving in a positive direction, this is one of the clearest signs that the business is headed for trouble.
Checking the business plans can also help out as if the business doesn’t have a strong, clear and concise plan for the future, this doesn’t prove to be a good sign for what’s to come.
Missed Tax Payments
Staying on top of the tax bill is a good sign that a company is running smoothly and on top of their spending.
But, when a business has missed tax payments, this is a clear sign that they are in serious trouble and may not be climbing out of the hole. The quicker you realise this as a problem, the sooner you can consider your options and look to business recovery.
Note that even if the payments are delayed, this can also be indication that insolvency could be occurring.
Delayed Employee Contributions
Employees should be receiving superannuation contributions by a company but when these are skipped over, just like with missed or delayed tax payments, it should raise a red flag.
If a business is missing these contributions, this is going to be indication of their inability to trade in the longer term and these contributions could eventually become a personal liability of the company’s director.
Ageing Of Creditors Increasing
If the company is not paying off its creditors in a timely manner and the accounts are becoming aged or past due, this should also raise some concerns for anyone looking into this business.
Also note that if the business is making some larger payments to just one creditor and no payments to another, this indicates they may be prioritizing certain creditors of others to ensure they can stay operating as funds to pay are so limited.
Lack Of Record Keeping
Good record keeping is a sign of a healthy business in operations. Poor record keeping however is a sign a business is in trouble.
Part of the reason they may be in trouble is due to the lack of proper record keeping in the first place so getting someone to solely focus on this is a good idea.
If a company is writing bounced checks for whatever reason, this is immediately something else to be looked into. Bounced checks rarely occur in a company that is currently in a healthy state, so investigate the reasons why.
Wear And Tear Of The Business
Finally, if it’s a bricks and motor business and you can see clear signs of physical wear and tear on their building, this too indicates the business is in trouble.
A healthy business knows that the premises are the first impression a customer sees so will be sure to keep it in good appearance.
A business who cannot afford to however has no choice in the matter.
Businesses can have a tendency to overlook problems such as those mentioned above, but one missed tax payment can be the start of many, and things can very rapidly become serious. Business insolvency is a common problem – you aren’t alone so talk to the professionals and get on the road to recovery.
Joan writes for licensed insolvency experts Clarke Bell. Based in Manchester and established in 1994, they focus on resolving business debt problems cash flow issues for SMEs, Sole Traders and Individuals.