Is this your company?
If you can recognise too many of the following financial warning signs then it is likely that your business is probably under pressure, at risk, or it could even be insolvent. Look through these signs. It may be time to make sure that you have tip top financial information and controls in place to avoid disaster.
These are the warning signs that you might encounter from the bank.
- Your overdraft is always at the limit?
- Your bank always wants more information.
- Your bank has returned cheques.
These are the warning signs that you might encounter with regard to reporting
- You have not filed the company’s accounts on time at Companies House and have incurred a penalty.
- You have not filed the company’s annual return at Companies House
What about the creditors
- Cash flow always tight so paying creditors is difficult.
- Inefficient production – can’t get stock because you can’t pay creditors on time.
- You can’t get stock on time because you miss deadlines for payment of supplier accounts.
What about people who owe you money? The 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 annum multiplied by 365.
Factoring Companies
- You don’t know how much they owe you.
- You don’t know how much the company owes the factor.
- Your factoring company is reducing your advance.
You and the management don’t know
- Gross Profit – accurately.
- Costs – accurately.
- Sales per month / per annum.
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.
VAT (HMRC)
- Not filing returns or paying tax on time.
- Had VAT surcharges.
- Doing deals over time with the local VAT office.
Systems Warnings Signs
- You don’t produce monthly management accounts.
- “Sage” or similar computerised accounts package shows negative balances in liabilities.
- You have a computer generated profit and loss but a handwritten balance sheet.
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!
So if lots of warning signs are coming up then perhaps it would be prudent to ensure that you have the right financial information at your finger tips. Employing a bookkeeper or part time financial director may be the way forward to wrestle back control of your finances and avert disaster. Businesses can run out of cash surprisingly quickly.
