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.
Similarly there are some signals that you can pick up from a business that warns you about a possible failure in the near future
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 your own employees are delayed.
4. Directors offering to differ their own salary and that of their 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 average days outstanding.
The author P V Subramanyam is a Chartered Accountant by qualification and a financial trainer by profession. Writing being a passion he also regularly pens his thought in his blogSubramoney.com