Look out for early signs of underperformance

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Signs of underperformance can be difficult to spot unless there is a sudden and catastrophic disaster. This could be an unexpected loss of key staff, a new competitor with a better or cheaper product or the loss of a key customer as just a few examples. It is quite possible for a business to trade apparently successfully while things go wrong under the surface. Ben Cowgill at Bolton Insolvency Experts explains why it is extremely important for directors to be aware of early signs of underperformance and act on them accordingly and why an insolvency practitioner (IP) could help. Owners and managers must keep an eye on the key success metrics they have identified. Early signs of a problem may include a lower than expected bank balance, increased use of an overdraft or reduced profit margins. These indicate that costs of production or overheads are increasing faster than revenues. Whilst it may be possible to manage this for a short time, if the business is unaware it will be unsustainable in the long run. If inflation forces up costs or exchange rates move to make components more expensive, action will almost undoubtedly be needed in order to maintain margins. Companies with significant amounts of debt should also keep a watch on interest rates especially as they are predicted to rise. This is especially true now businesses have got used to low interest rates. Recent research shows that 80,000 businesses think they would be unable to service debts after even a small interest rate rise which is double the number who said the same thing six months earlier. The best advice is to always ask yourself difficult questions where your business is concerned and always act immediately if you recognise signs of financial distress in your company. If problems are identified early, you can act. It’s not always easy though but getting support from an IP is far better than burying your head in the sand and waiting until things get worse. Liquidity or cash flow problems rarely fix themselves. Finding the cause is essential, as is understanding differences between a symptom and root cause. This is one way a licensed IP, or other trusted adviser, can help. If your company is unable to keep up with financial obligations and you are concerned about your company, contact Bolton Insolvency Experts now on 0300 303 8284 or or via our contact us page.