| Take account of insolvency worries
AN INSOLVENT business is one that can't pay its debts as they fall due. A survey by CPA Australia found 11 per cent of businesses seeking finance were doing so to cover existing debts and 21 per cent wanted more cash to cover tax payments. Look at whether your products or services can be made more efficient or take a hard look at your overheads - if you are carrying seven cars and three offices when two sales representatives and two cars and a phone will do, it's time to make some cuts and stop the cash drain. If they are using this as a guide, by the time the bank account is dry it is too late. A business with no plans for profit on the horizon faces erosion of its capital. "A good deal of small and medium enterprises hang on too long on the hope of turning things around. "The problem is that so many businesses are not getting financial reports on a timely basis - often even when they have a bookkeeper. Macks Hall Clifton partner Tim Clifton says a company owner must face these issues or risk personal liability. A thriving business may not have the time to chase its outstanding debts, but this can cut into its ability to make more sales. Businesses should look to raise their prices or look at what costs can be cut to improve profitability. Mounting debts, broken promises of payment and increasing formal demands for payment are pretty clear signs of a failing or disorganised business. Titman says businesses relying on day-to-day bank balances have left their run too late. Missing business plans, cash-flow forecasts and disorganised internal accounts mean the business could already be failing without a way of telling the company owner. "If the business may not be likely to be viable into the future, owners need to explore whether they can adapt their business and expand into new ventures," he says. If your business is relying on more security from the company owner or bumping up against its overdraft limit and defaulting on loans, your first port of call should be your financier. |
Tuesday, 10 April 2012
Take account of insolvency worries
