warning signs in a £5m business

Some clients hire me for just one day.

This particular client was a construction company turning over £5 million. The directors were ambitious. They wanted it to become one of the best-run businesses of its size in the country.

By any reasonable measure, it was already a good business.

But in a single day, I found three warning signs.

1. Customers were quietly taking longer to pay

A customer who had always paid within 30 days had slipped to 35, then 40.

Others were paying after 60 days.

Each delay felt small in isolation. But they were slowly adding up.

What was really happening?

The company was quietly turning itself into a finance provider.

Whenever a customer pays beyond the agreed terms, you are effectively lending them money. If they rang and asked to borrow that amount from you directly, you would probably say no.

But when an invoice drifts beyond its due date, they take the money without ever asking.

2. Old quotes were being squeezed by new costs

Material prices had risen. Wages had increased.

But nobody had gone back through the work already quoted to check whether those jobs were still profitable.

The business was busy, but busy does not always mean profitable.

A job that looked healthy when it was priced can become far less attractive by the time the work is completed.

If nobody checks, the company can work harder while making less money.

3. Nobody was looking often enough

The third problem was the simplest.

The directors were not reviewing their debtors, creditors and bank balance together every week.

What are you owed?

What do you owe?

What is actually sitting in the bank?

Placed side by side, those three figures can tell you an enormous amount about the health of your business.

Once the right system is in place, the check can take five minutes.

Good businesses can still get caught

This was an ambitious, successful and well-run £5 million company.

Yet all three issues were sitting there.

That is how easily it happens.

The directors who come through difficult periods are not necessarily those who started with the strongest businesses. They are the ones who watch their numbers, spot changes early and act while they still have choices.

My book, Before the Wave, gives you a simple system for doing exactly that.

It is practical, straightforward and easy to read. More importantly, it helps you identify the warning signs before they become serious problems.