No health deteriorates overnight. Sure we have heard of cancer, liver and kidney failure – but there are always some signals. Ignore them, and you are dead. Literally.
Similarly are there some signals that you can pick up from a business that pre warn you about failure?
Well here a few that I remember from my consulting/ training days:
1. In ability to pay the statutory dues: this could be Service Tax, Income tax, TDS made from vendor/ employee payments. ….When you are running out of cash to make these payments, see what is going wrong asap.
2. You have some white elephant assets, but your top management refuses to part with those assets saying ‘these are strategic assets’.
3. Not paying salaries on time. After the government and the vendors, the salaries of own employees gets delayed….
4. Directors offering to differ their own salary…and that of the top management…
5. Customer complaints and employees attrition: the customers and employees who walk with their talent. When they go they cause two types of damages – they take a few more clients, and sometimes a lot more employees too.
6. Raising more money- but using it in working capital. This is actually increasing your total overall costs, because of the higher interest amounts. It could also be a signal of the avg. days outstanding.
more qualitative perhaps…but these are the financial warning bells that i could think of….
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