Financial difficulty can often creep up unnoticed because no one is really watching for the early warning signs until they become so obvious that it may be too late.
Early warning signs of business financial difficulty include:
- Increasing levels of supplier debt, bank credit and arrears of HST and payroll remittances over time, particularly without a corresponding increase in sales.
- Receiving “overdue” account letters from suppliers or having your account sent to collection agencies.
- Losing clients or not getting repeat business from clients.
- Significant old items in inventory.
- Increasing amount of old accounts receivable and difficulty collecting.
- Frequent cost over-runs on contracts.
- Renting or buying equipment, vehicles or business premises beyond what is required to operate the business.
- Retaining staff who are not fully utilized when there is no real prospect of work.
- No monthly accounting reports and/or not reviewing them and comparing to budget.
- No budgeting and/or planning is done.
Managing your business day-to-day means watching for these and other early warning signs and adjusting your business to deal with them on a timely basis. As with most problems, the earlier they are identified and dealt with, the less likely that they will grow into something unmanageable.
Julie Molasky, CIRP, Licensed Insolvency Trustee
Licensed Insolvency Trustees
Fresh start…the road to financial freedom