Spot the early warning signs

Whether you are concerned about the health of your own business or have concerns about a client or customer could you recognise the financial early warning signs?

As the pressure on business seems likely to continue for the foreseeable future, it is vital that business owners and managers stay alert, understand the warning signs and take advice. Diane Hill, Corporate Recovery Partner looks at the top ten warning signs:-

Not collecting payments from debtors on time and your average debtor days are increasing
More than a month behind in payments to HM Revenue & Customs
Work in progress is increasing and not being billed on time
You have exceeded your overdraft facility or your bank balance is steadily reducing
You feel like you have little control over costs
Long-standing suppliers are no longer keen to do business with you, and you are widening your range of suppliers in order to obtain more credit
Your business is largely reliant on one or two customers who are not paying as well or as promptly as they used to
Outstanding debtors or potential bad debts seem to have increased suddenly
Increasing borrowings just to keep the business running with no clear direction
Receiving final demands or writs

You should constantly be on the lookout for these signs and let them be your early warning system. Once you recognise that there is a problem steps can be taken at an early stage to help you with a meaningful plan. By keeping a close eye on your customers you can help to avoid the bad debt trap by taking action at an early stage. Watch out for the small changes to usual behaviour patterns that could soon mount up in to one big bad debt:-