How can business owners and their advisors see the key warning signs of a business in financial or operational trouble? In this article, we will identify the key warning signs that a business could be in distress, including cash flow blockages, stressed relationships with important suppliers, drama with the Australian Taxation Office (ATO), overwhelmed leaders and bad family ‘vibes’.

Cash flow blocks are a distressing difficulty commonly facing businesses that are headed for troubled waters. Some warning signs of this include: negative operating cash flows, payments to suppliers and employees that are higher than receipts from customers, delayed payments to creditors, continued trading losses, high and increasing gearing.

In relation to strained or stressed relationships with suppliers, maintaining a good quality of relationships between suppliers and businesses is vital to avoid a business downturn. Once the relationship with suppliers is stressed, the quality of the product and service, and the customer’s overall experience is also likely to suffer. Warning signs of this include regular requests of suppliers to extend terms of trade, ‘shopping around’ and suppliers remaining unpaid for extended periods.

When a business’s track record is negative with the ATO, the business can suffer detriment and be put into a volatile, fragile position.

If a business’ leaders are overwhelmed or burnt out, this may be a precursor to the business not doing well. Warning signs of this include: leaders avoiding meetings with suppliers, creditors, banks, the ATO, accountants and advisors, not returning calls or emails and avoiding or delaying difficult decisions. Chronic stress here can have a role to play and so it is vital that leaders investigate the ‘human side’ of their work and take action to take care of themselves.

A person’s family also has an impact on their business. If there are ‘bad vibes’ in a family unit, a business leader, owner, manager or advisor may carry this over to their work. This is also an indicator of business distress.

Often businesses displaying these warning signs are salvageable; so early intervention and assistance are key to their ‘salvation’. Should you need advice if your business looks to be in trouble, please feel free to contact our team at the Quinn Group for accounting, legal and financial planning assistance.

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If you require further assistance with respect to the above or would like to know more, you are welcome to contact our team of experienced lawyers and accountants by clicking here to submit an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange conference or appointment.

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