The words that strike fear in the business world, ‘[insert your company name] has gone into administration’. They are words you never want to see, as it not only causes pain and heartache for the owners and employees but also customers and suppliers.
There have been a number of high profile collapses over the last couple of months, only this week, Toys R Us and Maplin having to admit that time was up. The inquest into the demise of Carillion is still rumbling on.
There are plenty of differing factors in these corporate failures but they all share some whiff of commonality – namely misguided management based on poor management information or just a reluctance to listen to what others were saying. In all cases, one thing would have made it plainly obvious that things were going awry – financial management information.
In the case of Carillion, having a more robust financial evaluation mechanism might have sent alarm bells ringing at the wafer-thin returns on some of the contracts they were bidding on, and might have lead management to say, ‘enough is enough, this is too risky for us to bid on’.
In the case of Toys R Us, the signs that sales were falling yet overheads of renting large out of town stores remained constant should have alerted management that profits were being squeezed and action needed to be taken to balance the books.
Understanding your ever-changing financial position is absolutely key to survival in today’s fast paced business environment, and hopefully the management as Prezzo and Jamie’s Italian have taken steps to ensure survival before it’s too late.
If you haven’t looked at your profitability trends recently or established whether your fixed cost base can support a fluctuating sales volume, then now is the time to take action, before Mr Administrator and his band of creditors come calling.
Foxtrot Twenty can help by providing financial information that can give you the direction you require to stay on track. From a part-time Finance Director role or simply on a project basis to give your company a healthcheck, we can help. Find out more and get in touch today, times are uncertain – you don’t want to be.