The red flags of business which may cause problems for our business are many. Historically, we have concentrated on red flags mainly related to short-term issues, such as focusing on the payment of outstanding and/or past due invoices, a lack of stock noticed by sales reps when visiting customers, or when no one is available to discuss account issues and so on.
The fact is that if many previous short-term and red flag factors could have been identified earlier, this may have avoided or minimised damage in the future. Identifying red flags as early as possible, is more important than ever due to the pace of change and the volatile nature in our commercial world today.
Therefore, identifying a new range of red flags from all sources, and taking appropriate action as soon as they are identified, is paramount. We also cannot just think about the traditional red flags which might be applicable to our marketplace. The reality is that a review of the wider business community is now required.
Your awareness of identifying red flags which may impact negatively on your business which we often reviewed in the past, was when there was a change in the spending habits of your business’s customers. For instance,
- previously the customer’s business operated from standard looking offices and warehouses, yet now they are moving into lush and expensive looking premises, or
- the directors and senior management are suddenly seen driving luxury cars, or
- having expensive lunches in classy restaurants, or seen at all the major events in town, or spending on costly advertising campaigns, etc.
Moving on, what might be the factors which are likely to lead to tomorrow’s red flags of the future. These factors include, but are not limited to:
- the ATO’s debt collection actions to recover unpaid taxes and superannuation contributions, even from those businesses that are no longer operating;
- the actions of politicians seeking increased taxation contributions in a vain attempt to balance their books and to cover for their own financial incompetence,
- costs imposed by governments to cover the increased demands of do-gooders and “disadvantaged” people against business entrepreneurs, farmers, and savers with SMSFs,
- increased red and green tape burden designed and implemented by bureaucrats,
- the actions of “entitled” people who believe they do not have to honour signed contracts when seeking finance,
- the hideous time and dollar costs to creditors by the courts trying to enforce their rights, whilst
- the creditors which receive no support from the courts to actually enforce the recovery of funds if the creditor wins the court case, etc.
The world has changed considerably since the COVID years and the demands of government, bureaucrats, do-gooders, and the entitled people, are causing unnecessary distress for consumers, savers, and businesspeople alike.
It is also obvious that in a number of areas in Australia, there are pockets of financial distress with spending decreasing and loss of business as commercial enterprises close down or move to other areas in the country.
All the above factors therefore will lead to the red flags of tomorrow. A business owner and their managers would therefore be wise to start to take positive action now against perceived future red flags to minimise their losses in the future.
Want to know more about this topic, contact Kim at kim@creditmatters.com.au, or on Mobile 0411 649 261. Alternatively, have a look at what we offer via our website at www.creditmatters.com.au
