Firms urged to take their heads out of the sand

An estimated 880 small businesses that failed in the last quarter of last year could have kept their doors open had they sought expert advice and implemented management initiatives during 2008.

This claim comes from turnaround and insolvency specialist Tenon Recovery, which estimates that a company has an average 33 weeks to determine whether a series of turnaround initiatives will be enough to save the business.

Initiatives that businesses can undertake include:

• establish key business indicators (KBIs) and monitor their performance monthly

•  cash is king – forecast your requirements on a weekly basis and ensure your finance facilities are adequate

• outsourcing specialist functions (e.g. bookkeeping)

• reviewing and swapping suppliers to get the best deals

• ensuring regular meetings with the management team and key stakeholders

• Continuous reviews of all financial outgoings to prioritise expenditures and cut costs when necessary

Turnaround is possible if entrepreneurs spot the warning signs early enough and act upon them but approximately one in eight fail to carry out any forecasting and one in three only carry out forecasting once a year.

Carl Jackson, national head of Tenon Recovery, said: “Identifying any potential issues for a business early enough can mean the difference between a turnaround, restructuring or insolvency. It is a case of a stitch in time can save an entrepreneur’s dreams from unravelling.

“Many of today’s entrepreneurs have little or no experience of operating in a recession and have benefited from almost 15 years of uninterrupted growth and opportunities. They are not used to having to keep such a close eye on their business.