There is an old saying ‘prevention is better than cure’ and it is one that rings very true for the financial stability of your business.
At Marshman Price we see businesses of all sizes in various stages of financial difficulty and it is never easy to pinpoint a particular time when things started to go wrong. A business is a complex animal no matter what the size; and problems are caused by a chain of events not a single factor. There is no ‘one size fits all’ solution and if you have looked through our website, you will see we don’t try to offer one.
However while it is true that you can rarely point to a single factor there are some common warning signs that you can look for. Obviously you need to tailor these to your individual business but if some of these apply to you it could well be time to take a long hard look at how things are going.
1. Slipping tax, VAT or regular payment deadlines. If you are not keeping up to date with HMRC and other important outgoings then you really do need to ask why. It is vital that you keep on top of regular payments such as your tax contributions (particularly with the new constant monitoring) and if not, investigate why not.
2. Fire fighting. This is a bit of a difficult one because one of the things that we sometimes find hard to face is our own failing with regular tasks. There are also people who seem to enjoy a crisis and like to be the cavalry rushing in at the last minute. These are very different though from firefighting to balance the books. If you are constantly paying suppliers because you have been on hold for example you may have a wider issue to deal with.
3. Avoidance of the issues. We sometimes see a management team collectively avoiding the problems they face. Usually this is a result of not wanting to see the truth that you have a financial problem to deal with. For many managers their business is their life and it’s difficult to admit you are not fully in control.
4. Deteriorating relations with the bank. If you find yourself avoiding the bank or that they are less than willing to discuss your finances with you, it is probably because you know the outcome of the discuss will be unfavourable.
5. Robbing Peter to pay Paul. There is a big difference between juggling the cash flow now and again, and knowingly not paying one element to support another. A great example of this is when senior people within a company are taking reduced (and sometimes zero) salaries. Of course for a new business this is probably quite common but for an established business it suggests a deeper problem.
6. No buffer zone. This is when there is no possibility of a financial crisis management policy because you are working hand to mouth each month. Usually this is accompanied by the belief that there is a ‘big deal’ on the cards that will save you tomorrow.
If any of these points are ringing true for your business, then we would urge you to look at your position and call us to see if we can help. These coping techniques are not what they seem because far from helping you cope – they could be helping you avoid the problem.