Most businesses that fail do not collapse overnight. The warning signs show up months in advance. Acting early, with a clear plan, is often the difference between closing the doors and turning the business around.
Recognise the warning signs
- You regularly struggle to pay suppliers, salaries or SARS on time.
- Your overdraft or credit facilities are always close to the limit.
- Sales are steady or growing, but cash keeps running short.
- You don't have up-to-date financial information to make decisions.
Step 1: Get an accurate picture
A turnaround starts with the facts. Bring the books up to date and prepare a short-term cash flow forecast, typically week by week for the next three months. This shows exactly when cash will run short and how big the gap is.
Step 2: Protect your cash
Focus on what brings cash in and what takes it out. Follow up on overdue debtors, cut non-essential costs, review stock levels and talk to key suppliers about payment terms before you fall behind, not after.
Step 3: Engage SARS and lenders early
If you cannot pay a tax debt in full, SARS may agree to a payment arrangement, but you need to apply and engage with them. Lenders are also more open to restructuring when they are approached early with a credible plan and accurate numbers.
Step 4: Fix the underlying problem
Cash pressure is usually a symptom. The cause may be pricing that doesn't cover costs, a loss-making product line, too much debt or weak financial controls. A proper analysis identifies what needs to change so the business doesn't end up in the same position again.
Step 5: Consider formal options if needed
Where a company is financially distressed, the Companies Act provides for business rescue, a formal process designed to rehabilitate the business under the supervision of a business rescue practitioner. It is not right for every situation, and professional advice is essential before taking this route.
From distress to excellence
Turnarounds work when owners act early, use accurate numbers and follow a clear plan. That is exactly the work we do with our clients: moving businesses from financial distress to financial excellence.