CORPORATE RESTRUCTURE – EARLY WARNING SIGNS
If a Business is in financial distress we would encourage you to act early. By not dealing with any issues that arise your options to fix them will be limited and jeopardise the ability to place the Business back onto a sustainable footing. To do this it is important that you recognise the early warning signs and take prompt action to address these. These can include:
- Quality and Frequency of Management Information – Having access to quality and timely financial information is key to being able to run a Business effectively and making the right decisions;
- Management Team – signs such as a high turnover of key staff can be a sign that issues may lie ahead;
- Market Factors – It is important to understand the dynamics of the market you are operating in. Businesses constantly evolve and if you do not keep up with market trends there is a risk that the Business will be uncompetitive;
- Competitive Position – It is important to analyse your market position and the ability of your competitors to gain market share;
- Capital Investment – Is the Business well invested operating with technology that’s competitive in the marketplace?
- Working Capital – Has the Business sufficient headroom on its working capital facilities in order to grow and flourish?
- Lost work – In situations where you compete to win work we would advise you to understand the reasons for any unsuccessful proposals or tenders. Was it simply price related? Or are there other factors that you may need to improve on.
These are all signs that you should constantly monitor and address in order to avoid being in a position where the Business is in financial distress.