Retail series: 10 warning signs a retail business is in trouble

18 March 2019

Retail is a notoriously fickle and challenging industry. It’s characterised by seasonal ups and downs, constant downward pressure on prices from lower-cost offshore competitors, the continued growth of online channels necessitating globally-competitive pricing, and large-scale competitors such as Amazon and Zara directly entering (and disrupting) the Australian market.

We see more and more retail businesses come to us under extreme financial duress. You only need to take a walk down a local shopping strip to see the ramifications for yourself: another ‘For Lease’ sign.

It’s a tough environment to operate, and it’s understandable there’s such a high failure rate for retail businesses. However, with early intervention, there are steps you can take to once again become financially viable. The key is to heed the warning signs early so the options available are maximised.

Here are ten common warning signs that a retail business is in trouble:

  • Falling behind in rent
  • Creditor payment terms exceeded
  • BAS payments made late
  • PAYG withholding and superannuation is increasing
  • Stock turnover slows down compared to previous years
  • No likelihood of increased sales on the horizon
  • Supplier payment terms are blowing out
  • Major suppliers requesting personal guarantees
  • Financiers unwilling to extend facilities
  • Peak sales period are below forecast

ACTION:

The good news is that with the help of an experienced professional, there are options available to turn things around.

It’s tempting to simply bury your head in the sand and brush the issues aside. If you have a clear idea of where you are, you can then develop a feasible turnaround plan to get to where you want to be. A big part of this will be setting and monitoring budgets and cash flow forecasts so you have total clarity around what you need to achieve to keep moving forward.

If you are experiencing one or more of the above warning signs, speak to an adviser (accountant, solicitor or business turnaround expert) immediately. The faster you act, the greater your likelihood of being able to work through your challenges and come out the other side successfully.

Contact our team

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