When it comes to business stress, there’s no such thing as knowing too early. Major business changes that take time to have an effect, being longer for larger business, and ignoring or being unaware of the warning signs could spell disaster.
Spotting a Key Indicator
I have found that poor or inadequate cash flow is one of the first key indicators of financially struggling company. Defaulting on bills or needing to negotiate terms for a payment extension with creditors are clear markers that a company is having financial difficulties. While speedy and effective communication with suppliers is vital, this rarely deals with the cores issue that are causing said financial difficulties. Ensuring that the restoration of business to financial health is completely successful requires owner managers to take a more strategic approach in addressing the root cause of the problem.
Once you’ve spotted signs that your business might be in trouble, you will need to prioritise and decide which areas of the organisation need your attention first. Is it possible to turn things around? If so, what areas of the business require attention first (i.e. could tightening up on cash-flow management and making some much-needed cost reductions relieve pressure on the business)?
What can you do?
Having a clear, accurate view of the business’ cash position, along with an understanding of which activities are the most profitable may help alleviate some symptoms of business stress. For example, the owner manager could review cash management processes and examine payment terms with both customers and suppliers. An audit of the business’ assets and liabilities may also be required, along with careful consideration of how the company will fund future business plans, ventures or investments.
Be aware, however, that if you have a sense that things are getting tighter financially, this could well be a sign of a more serious underlying problem.
By ensuring that you know what to look out for, the signs of business stress can be treated before they become a more dangerous problem. And taking action early will give the organisation the best chance of recovery.