1. Regular cash-flow problems
Even the best-run businesses can have awkward hiatuses between cash coming in and paying their bills. The occasional tight spot is uncomfortable - but if it’s happening regularly, it’s time to take action. Failure to keep on top of cash-flow and pay overheads on time, be they rent or salaries, will very quickly prove terminal to any business.
2. Being constantly squeezed on margins when you quote for new business
When competition for work is tough, it makes sense to quote low and squeeze your margins. But if you’re taking a hit on every job, this will soon catch up with you. And if you’re so desperate that you’re quoting below cost price just to get cash in the door, you’re running on borrowed time.
3. Being busy but with no discernible improvement in the financial position of the business
The 'busy fool' is so bogged down with the day-to-day running of the business that they never have time to tackle the root causes of the problem. You should never confuse crisis management with strategy. Sometimes you must simply stop and think before taking decisive action.
4. Customers taking longer to pay their debts
Many large companies are extending their standard payment terms, leaving their suppliers with little choice but to wait. While you may have only limited control over late payers, you should invoice them early, chase them hard and pay your own debts just as they fall due, not before.
5. Difficulties meeting your tax obligations
If you are unable to meet your monthly PAYE or quarterly VAT bills, do consider making a time-to-pay arrangement with HMRC. But do it early – leave it too late and you could be hit with an unaffordable bill.
6. Being harassed by creditors
If you’re receiving solicitors’ letters, statutory demands or visits from bailiffs over unpaid bills, you must take urgent action to restructure your debt. Approached early, they may be willing to negotiate a realistic payment plan. Fail to act and you could face a winding-up order and the decision may be taken out of your hands.
7. Constantly having to ask the bank for a higher overdraft limit
No matter how good your relationship with your bank manager, their ability to lend to small businesses is being steadily reduced. Do not assume that they will be willing to lend to you or extend your overdraft, just because they have done so before. Don’t forget that there are alternative sources of finance - like invoice trading – that allow you to free up the money you have tied up in unpaid invoices.
8. Being a firefighter, not a strategiser
Beware of spending more time dealing with suppliers and creditors and less time dealing with customers and new business. If your only focus is firefighting, your chances of growing the business are all but zero.
9. Taking desperate measures
If you have started using your personal funds or your own credit card to pay for supplies, you may be numbed into staking more and more of your own livelihood on the business. But by making the business look like a basket case, you could unwittingly condemn it yourself.
10. Feeling depressed about going to work, or having sleepless nights
Running a business in a tough climate is stressful. Running yourself into the ground is not compulsory. If you are failing to cope personally, the business will struggle too.
Christopher Shaw is CEO of the SME invoice trading company Platform Black