Picture yourself at the beach. It’s a beautiful day, and you decide to go for a swim. You’re so busy enjoying the sunshine and the refreshing water, you don’t realise you’re drifting further and further from the shore.

Little do you know you’re heading right into shark-infested waters.

Being in business can be the same. Sometimes, you are focused on the day-to-day tasks and you miss the bigger picture. It can be difficult to see when you’re heading for trouble. But it’s important to know there are five huge warning signs pointing you to change before it’s too late.

Sign 1: Your business cannot pay you a wage

If your business is not generating a return to you, why are you doing it? Are you risking or spending your personal equity in a business that is out of fashion or no longer sustainable?

When was the last time you asked yourself these questions? If the answer to the first is no, and there is no realistic prospect of a change in your circumstances, then you should get advice. Your personal equity may be at risk.

Sign 2: The IRD is asking questions

The IRD will only investigate a business if they see activity that is in some way out of the ordinary or you are in arrears. If the IRD is requesting an investigation, then it’s a sure sign you’re not compliant and need to clean up your accounting in terms of your tax obligations. Speak to your accountant immediately about how you might be in breach of your obligations.

If you are in arrears contact the IRD and arrange a repayment plan. If you are suffering from hardship you may qualify for a debt reduction or some form of relief.

Sign 3: You’re struggling to pay debts

• - Are you juggling money from one account to another in order to find the cash available to pay your debts?
• - Are you finding it difficult to restock shelves?
• - Is your overdraft exceeding its limit regularly?
• - Have you lost key customers?
• - Are you missing forecasts and budgets?

Answering yes to any of these questions suggests a poor cash flow strategy, and it can sink a business if caught unawares. You could also be in breach of your Director’s Duties if you do not have enough funds to pay your debts as they become due.

Speak to your accountant or an insolvency specialist about your debt situation. A simple solution might be to tweak your terms of trade, use invoice factoring, or to seek a creditor compromise to pay down debt over time. You may be able to give yourself more of a cash flow buffer to create a successful business turnaround.

Sign 4: Your best staff are leaving

If they sense the ship is sinking, are your staff going to brave those stormy waters instead of staying on the boat? Oceanic metaphors aside, if you’re seeing a huge exodus of staff, this could be a clue that your company is in trouble.

Luckily, you have an opportunity here to hire some great minds who can help you turn things around. By hiring some clever people with great problem-solving abilities, you may be able to rescue much of what has been lost.

Sign 5: Your accounts are a shambles

Do you have a balance sheet that you’re regularly reviewing? When was the last time you reviewed a profit and loss statement? Do you know at any given time what your liabilities are or if your business passes the “Solvency Test”?

This is where a business turnaround specialist – like McDonald Vague – can help. We can spot issues in your business and help you repair them … before they result in insolvency or liquidation. Contact us now.