EARLY WARNING SIGNS OF

“FINANCIAL DISTRESSED”

Pat Pattinson

EARLY WARNING SIGNS

WHAT IS “FINANCIALLY DISTRESSED”

Section 128

(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or

(ii) it appears to be reasonably likely that the company will become insolvent within the

immediately ensuing six months;

EARLY WARNING SIGNS

WHAT IF “FINANCIALLY DISTRESSED”Section 129.

Company resolution to begin business rescue proceedings(a) the board of a company may resolve that the company voluntarily begin business rescue proceedings and place the company under supervision, if the board has

reasonable grounds to believe that—

(a) the company is financially distressed;

EARLY WARNING SIGNS

Section 218

(2) Any person who contravenes any provision of this Act is liable to any other

person for any loss or damage suffered by that person as a result of that contravention.

WHY KNOW IF “FINANCIALLY DISTRESSED”

EARLY WARNING SIGNS

1.Utilisation of Overdraft from Bank2.Debtors v Creditors days3.Specials becomes the order of the day4.Reducing Margins5.Growth in Turnover but no profit

EARLY WARNING SIGNS

UTILISATION OF OVERDRAFT FROM BANK

• Meant as a short term solution• Used to cover shortfalls• Unable to survive without• Replaces debtors

EARLY WARNING SIGNS

DEBTORS V CREDITORS DAYS

• Creditors Payment depending on OD• Debtors days surpasses Creditors Days

EARLY WARNING SIGNS

SPECIALS BECOMES THE ORDER OF THE DAY

• Running Specials is the biggest form of Marketing

EARLY WARNING SIGNS

REDUCING MARGINS

• Cost Cutting becomes the main sales driver• Turnover becomes more important than profit

EARLY WARNING SIGNS

GROWTH IN TURNOVER BUT NO PROFIT

• Constant or Growing Turnover with reduced margins• Sales v Cost of sales

EARLY WARNING SIGNS

NOW WHAT

As an entrepreneur it is your responsibility to make use of all of the tools available to you. This includes the service of turnaround Professionals.You need to take the steps needed to save your business in the long runIrrespective of how uncomfortable it is now.

EARLY WARNING SIGNS

Pat Pattinson• TMA-SA

• www.tma-sa.com• CPM Services

• www.cpmservices.biz

Early Warning Signs of Financial DistressedPat Pattinson

INFOLOAD 2016