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Key Indicators of Business Success and Warning Signs Part 2

Business success is commonly guaranteed if the directors keep a close eye on its performance and cash flow. As already clarified in the first series of this blog, to avoid liquidity problems key indicators must be identified early and action taken to prevent debt collection or maybe even the irrevocable situation of bankruptcy. Business insolvency does not happen overnight, and there can be early warning signs as follows:

 

1. Non-payment of Tax Liabilities

A Company will often forgo the payment of its tax liabilities to ensure that it has sufficient cash flow to meet its wages and critical supplier payments. This may be considered to be an effective use of cash resources in the short term, however in the long term after those tax liabilities have continued to accrue penalties and interest are then imposed. Companies should seek financial advice, as a restructure may be able to be affected and a repayment plan entered into with the ATO to avoid the issuing of any penalty notices.

 

2. Continuing Losses

Companies with continuing financial losses for the past 2 years should review their asset and liability position. Idle or non-performing assets may need to be sold, in order to purchase new assets that will generate income for the Company. Financial advice in the form of an investigative accountants review could also be sought, in order to determine if there are any non-value adding processes in place that could be stopped and/or that a reduction in overhead costs and employee costs could be achieved.

 

3. No access to credit

In the event a Company has attempted to secure new lines of credit or to extend existing lines of credit, it may be necessary to engage an investigative accountant to consider alternative arrangements to be made, in terms of repayment of debts due, to achieve some breathing space and to free up some cash in order to continue trading.

 

4. Outside trading terms with creditors and supply on Cash on Delivery (“COD”)

When trading terms with creditors are well outside normal trading terms, i.e. 30 – 60 days and creditors are demanding that supply is made with COD, it is time to seek some financial advice in order to get trading back on track.

 

5. Receiving demands and/or other legal notices

When creditors are pressing for payment in the form of final notices and issuing legal demands, it will not be long before they receive a judgement order for their debt and proceed with winding up proceedings.

 

Our next blog in this series will help to identify further warning signs of possible upcoming liquidity problems.

 

If you would like to learn more about the debt collection services we offer, contact us now. We have over 30 years of experience providing professional and discreet debt collection solutions for clients of all sizes and across all industries. With debt collection agencies in Sydney, Melbourne and Brisbane we have the east coast covered.

 

Read More:

KEY INDICATORS OF BUSINESS SUCCESS AND WARNING SIGNS PART 3

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  • I have known the principal of the BOSTON Group (Derryn HARRISON) as well as key staff members (including Ben GOWER) for well over 2 decades and have been using their professional services for myself as well as for Powerhouse Logistics Pty. Ltd. on a regular basis, not only in Sydney but on a national basis.

    At all times BOSTON have been extremely pro-active, attentive, courteous and professional with all matters we threw at them. Their advice has always been extremely sound and commercial and I find them to be a "breath of fresh air" within the legal fraternity and have no hesitation whatsoever to highly recommend them.

    Peter Brueckner

    Powerhouse Logistics Pty Ltd (CEO)

  • Expect A Star has worked with The Boston Group for 10 years. In this time we have appreciated the ongoing support of Boston for all of our collection and legal requirements. Like most businesses cashflow is critical to ongoing success and growth, with Boston we have found a partner who are an extension of our business and play a key part in our cashflow management. The Boston Group bring a level of expertise to our business which is valuable and coupled with their excellent customer service we look forward to continuing to work with them for many years to come.

    Ryan Meldrum

    Former CEO

  • I have been using the services of The Boston Group and their legal entity for over 11 years. During this time I have found their service to be impeccable, delivered with the utmost professionalism and integrity. The vast majority of cases that I have placed with Boston were far from straightforward, requiring legal acumen and delicate handling. Having used all methods available without success to procure payment, I confidently placed these matters into their safe hands. In all instances a successful outcome was achieved.

    Mark Parish

    Credit Manager

  • SNP Security has had the pleasure of working with Boston Commercial Services for the past 11 years. Boston has played an integral part in the continuing success of SNP Security’s low DSO’s, 90 Day % Debt & of course Bad Debts Written Off.

    Amanda Griffiths

    National Administration Manager

Boston Commercial Services prides itself in offering specialised, professional services, through a highly experienced team of debt collector, with personalised client attention.