As the economic outlook continues to improve, DSH Chartered Accountants & Business Advisors is warning businesses to beware of overtrading.
“In times of economic recovery, it is tempting for businesses to seize every opportunity for new work that comes their way, particularly start-ups and those undergoing rapid expansion,” said John Moore, Partner at DSH’s Maidstone office.
“However, businesses unprepared for growth may find themselves at risk of overtrading. This stretches the business beyond its available resources, whether in terms of staffing, production capability or, most importantly, working capital, which can prove catastrophic,” said John.
The tell-tale signs you might be overtrading include:
- pricing too competitively, squeezing your profit margins
- increasing and/or continuous borrowing to get you through each month
- late payments to your suppliers as you struggle to manage cashflow
- poor credit control, with late payments by customers
- an increase in customer complaints
If identified early enough, there are a number of actions you can take to restore order and regain control.
A key element is ensuring you have up-to-date and reliable financial records. This will allow you to develop and maintain a cashflow forecast so you can see how the business is performing, and make more informed decisions about potential new business.
“Talk to your accountant today if you’re worried about overtrading. They will be able to help identify any potential dangers and help you manage the situation, as well as providing assistance with your financial reporting,” said John.
To find out more about DSH Chartered Accountants & Business Advisors, visit www.dsh.co.uk or call 01622 690666.