Seek business advice when distressed
When businesses are in need for support or distressed they have options.
Some business owners do not like to admit they need help, so they suffer in silence – and attempt to solve every issue on their own.
Those business owners who have lived through voluntary administration or bankruptcy will tell you that they “wish they asked for help sooner”.
There’s absolutely nothing wrong with asking for help. If you put the money aside for a moment, ask yourself why you haven’t asked for help? Is it your pride? Ego? Admitting defeat? Whatever your specific reasons – will the situation change if nothing is done about it?
SOME SURE SIGNS OF A DISTRESSED BUSINESS:
1. The business constantly struggles with low or negative free cash flow. The business owner personally lends money to the business and is rarely repaid.
2. Creditors are extremely nervous and call practically daily. The Finance Department and owners begin the ignoring game. Ignoring creditors becomes the only solution.
3. Employee superannuation is not up to date.
4. There are large outstanding ATO debt balances – with or without payment arrangements. Those under a payment arrangement frequently default.
5. The company has unhealthy shrinking gross margins with poor net profit results.
6. Every sales opportunity is accepted without reviewing the profitability even if the business lacks the capability.
7. Putting out daily fires is normal business practice. There is no time to work ‘on’ the business.
8. Inability to meet debt covenants.
9. Owners cannot see the light at the end of the tunnel and are mentally and physically exhausted.
To improve this situation ACTION needs to be taken sooner rather than later.
Business owners that have been through a Voluntary Administration or Bankruptcy will vouch that “NO change will place you in a worse position”.
Don’t wait until it’s too late.
HERE ARE SOME PRACTICAL TIPS TO IMPROVE CASH FLOW:
1. Communicate with creditors regularly. Be open and transparent. Tell them you have every intention to repay the debt and seek permission for extended time. Provide a payment plan that can be achieved.
2. Establish policies and procedures, especially for purchasing. Restrict the majority of spending until things turn around.
3. Establish policies and procedures for pricing, discounts, credit notes and warranty claims. With every warranty claim, make sure you recoup costs from the supplier.
4. Automate processes with systems. Don’t manually enter supplier invoices. There are many tools that streamline processes and reduce productivity related costs.
5. Create clear sales strategies to keep the sales team focused and driven on where and what, they should be selling.
6. Inventory based companies should analyse data. Categorise data in groups – fast moving, slow moving, obsolete stock. Create a strategic plan for each with the aim of reducing stock levels quickly.
7. Monitor and report employee compliance of policies and procedures. Lead by example.
8. Create dashboard reporting to allow for real time decision making with confidence.
These are just a few ideas that will assist with improving cash flow.
From experience, problems lie at the beginning of a process. If you aim to control the start, you can better control the end result. The root causes of issues has on going effects in other areas with a financial impact in the end.
Control the business with policies and procedures so employees have clarity over their roles and responsibilities.
To be profitable and sustainable the entire business must be financially vigilant and responsible.
So, if you find yourself stuck and need help executing changes – please seek help. There are plenty of people and companies that are there to support you.