Financial Distress Detection

financial distressAs the old adage goes, “Prevention is better than cure.” This not only applies to health and wellbeing but it also makes sense in terms of business. Think about it. It would be better to avoid a problem altogether rather than find a solution as it strikes. Achieving this feat entails that you should be well prepared and that you must also be equipped with adequate knowledge. One of the best ways to prevent financial distress is to know the warning signs and AABRS experts are here to tell us what these are.

  • Long Outstanding Receivables – When much of your credit sales remain unpaid and uncollectible for too long, it could give rise to liquidity problems and cash shortages. Take a look at your credit policies. Are they too liberal? Is your collection function ineffective?
  • Long Outstanding Payables – Likewise, when you have payables that have not been paid for a long time, you are risking interests and penalties. Plus, this can be seen as a sign of a problem. There’s no other valid reason for you to miss no your payments unless you’re short on the cash. Human error can also be a factor but with programs and systems in effect, this is rarely the case.
  • Dividend Cuts – It does not necessarily mean that when a company cuts down or eliminates their dividend payouts, it is already on the verge of liquidation. There can be other reasons such as retention for reinvestment purposes. However, dividends are one of the first to go should an entity be in financial trouble. It is still worth checking just to be sure.
  • Top Management Turnovers – Employees want to safeguard their sources of income and so if the boat is sinking, all passengers will want to abandon ship and save their lives. The same is true for businesses. If you notice defections in many top management positions, this should be a cause to worry. Remember that they are the first to find out about any problems that the company faces.
  • Reduction in Employee Perks – All companies know that happy employees mean happy customers thus more profits. Businesses will try as much to give perks and benefits to staff but in the guise of financial distress, these shall be lessened to a significant degree if not cut off completely.

It would be far easier to prevent and keep financial problems at bay rather than try to fix it so better keep the above list from AABRS in mind at all times.

Read More

AABRS Guide to a Financially Stable Restaurant

restaurant-fundingEvery entrepreneur and restaurateur’s dream is to expand their business and open up even more shops and branches. This cannot be achieved if you often find yourself financially unstable. You will need a steady cash flow and a positive income to enable the change to happen. We all know that doing so is both a task and a challenge. It’s not something that you can whip in thin air. How does one keep their restaurant financially stable then? Here are some tips to avoid falling in the pits of prepack administration or voluntary liquidation.

  • Track your Expenses

You need to have a good grip of the outflows and spending. You cannot let it loose or else you’d be risking your finances. Be sure that all transactions are recorded accurately and timely with all accompanying documents maintained and organized accordingly.

  • Analyze Your Sales and Income

Know how much sales you are generating and analyze these data to determine the low points and peak hours of business. This should also help you see where you could improve on and which items may have to be dropped as they do not generate income.

  • Trace and Evaluate Progress

Be sure that you evaluate your progress too. Compare sales versus expenses to find out whether you are generating any actual profit. Also compare these information acrss varying periods.

  • Avoid Credit and Debt as Much as Possible

Many restaurants fall prey to way too much debt and that can be detrimental. There is no harm in using credit to finance your operations but do not rely unto it heavily as a company running on liabilities is never attractive in investors’ eyes. It can pose risks to insolvency and bankruptcy. But if you are already drowning in debt, you need to go to a reputable firm like

  • Always Devise Plans

Be sure that you have your business plan rolled out as well as your budget to keep your operational and financial decisions and actions well guided. Do not rely on impulse decisions because they often lead to bad outcomes.

  • Leave Something for Savings

Do not spend everything that you earn. You should keep some as retained earnings which can be used for future projects, improvements or as a reinvestment in the form of new branches or other business endeavors.

  • Create Contingency Plans

AABRS experts state that it would be wise to have an emergency fund at the ready alongside contingency plans just in case certain risks come your way. You must be prepared at all times and this could help you remain stable amidst a crisis.

Read More