Signs of crises

• First sign of cash crisis

• Change of supplier or supplier power increasing

• Productivity of delivery problems may arise due to lack of adequate inventories of raw materials

• Operating margin declines as company unable to take advantage of settlement discounts

• Poor control over debtors (A/R)

• Customers given extra credit to persuade them to buy

• Customers’ industry in difficulty
• Changing customer base
• Customer bargaining power increasing
• Product returns increasing due to problems with product quality or weakness in customers’ own business

• Production not reduced as demand falls
• Poor production planning or poor inventory control systems
• Change in sales mix
• Problems with product quality leading to return of finished goods or increasing work in progress
• Seasonal demand

• Introduction of more modern plant
• Switch in product market focus to more capital-intensive products
• Introduction of new technology (and associated risks)
• Increase in excess capacity

• Sales volume decline
• Overhead out of control
• Overhead built up in expectation of future growth which has yet to materialize

• Industry maturing or in recession
• Products becoming obsolete
• New competitors or increased rivalry from exiting competitors leading to price competition
• Company cutting margin to obtain volume

• Higher interest rates

• Inappropriate financial structure

• Growth out of line with funding
• Poor working capital management
• Acquisitions / investments

• Poor tax management
• Creative accounting

• Loss of market share
• Declining industry
• Adverse foreign exchange translations
• Divestment of subsidiary

• Change product mix
• Price pressure in the marketplace
• Increasing scrap levels

• Lower productivity due to lower demand
• Indirect labor costs out of control
• Strong unions
• Unmotivated/disaffected employees

• Lower productivity, overstaffing, or lower technology
• Employing staff ahead of expected demand