Things to look out for in your business that show your business could be in distress.

Being a business owner is a risky business on its own. You invest a great deal of your own time, and money to make it work but from time to time all businesses face uphill battles.

All business owners need to take effective steps to prevent their business from getting into a state of distress.

All businesses are different. You need to understand your own business, the market you operate in and the wider environment for warning signs. The following are some general indicators that every business owner should keep an eye on.

Cash Flow

Cash flow is the pace at which money is coming into and leaving your business. Staying on top of your cash flow and adequately managing your credit control is at the core of a successful business. As the saying goes ‘cash is king’.

Once you integrate a good working system and become adept at projecting your business’ cash flow, you will have more scope to manipulate the direction of your business or indeed invest in building and/or developing your business. All businesses should ensure they have rigorous and documented procedures in place and this is properly communicated to their staff, especially those in the accounts team. The procedures should detail how you want your cash flow checked, recorded and reported back to you.

If you have problems with cash flow you need to consider why this might be the case.

A review of the processes and procedures you implement within the business may assist you to identify whether you may need to operate a more stringent billing procedure or chase your debtors harder for example. To be able to effectively do so you need to ensure you have properly drafted legal agreements and that you keep abreast of the terms of the same. It is important that you are fully aware of payment terms for all clients and suppliers alike.

Business Restructuring

If you find that your business may be disrupted, you can turn this around by ensuring that you evaluate the business and its structure (and continue to do so) to ensure it still works in terms of risk and markets.

It may well be that you might find yourself in a situation where you have to make staff redundant, restructure the business or cut ties with people. It is important that this is all done correctly to ensure your business is not exposed to an employment claim. A lengthy and expensive legal battle or having to pay damages to a disgruntled employee will hit most businesses hard, let alone those in financial difficulties.

Before terminating any employment, existing arrangement or altering the payment package of any staff it is important that you have specific legal advice to ensure that you do not expose yourself to a potential claim.

Flex Capital offers a fast, effective invoice discounting solution that injects cash flow into your business.

We also offer Structured Finance and PO Funding options.

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