Signs of financial difficulty

Every business is unique, with its own individual structure and operations, and its own set of challenges. It can sometimes be difficult for owners and managers to identify early on where problems arise and the impact this has on the financial position of a business.

If a business is showing signs of too many of the following indicators, then it is possible it is under financial pressure and at risk of becoming (or already is) insolvent:
 
Debtors
  • Not paying on time with delays in payment increasing.
  • No up to date information on the overall debtor position.
  • Significant balances outstanding with only one or two key debtors.
  • No specific debt collection process in place.
  • Reluctance to issue credit notes.
Creditors
  • Tight cashflow constraints, leaving little room for movement when making creditor payments.
  • Being unable to obtain new credit, extend current credit terms or having credit facilities withdrawn.
  • Taking longer to pay creditors.
  • Suppliers terminating accounts or refusing to provide further supplies.
  • Management constantly dealing with creditor calls.
Tax
  • Penalties arising due to returns not being filed on time.
  • Late payments to HM Revenue & Customs.
  • History of entering into payment plans with HM Revenue & Customs.
  • Threats of walking possession action.
Invoice finance / factoring agreements
  • Reductions in the advances made available.
  • Invoices regularly disallowed for advance purposes.
  • Lender enforcing terms requiring advances to be repaid if debtor balances not received.
Bank
  • Ongoing negative cashflows.
  • Overdraft facilities continually in use and close to their limit.
  • Bank constantly requesting more financial information.
  • Requests for new or additional overdraft / loan facilities denied.
  • Payments failing to clear.
  • Bank seeking additional security for monies owed via personal guarantees.
Legal actions
  • ŸŸFormal claims issued in court.
  • Attendance by sheriffs threatened.
  • Statutory demands or winding up petitions received.
If your company is showing signs of distress, it is best to seek professional advice as soon as possible. Call us now on 08000 833 943 to find out how we can help you.