Financial Difficulty

Key Business Factors Contributing to Financial Difficulty

Businesses can find themselves in financial difficulty for various reasons. They may be impacted by cash flow problems through rising costs and supply change disruption; changes in the economic environment they operate in; or changes within their internal management. These can be warning signs which may individually or collectively indicate financial difficulties. It is therefore important to consider ways in which to become more resilient to these challenges and protect your business.

Many of the problems affecting business performance fall into at least one of the following categories and can lead to financial difficulty:

  • Cash Flow - The way a business manages cash in the short term is an essential part of ensuring long-term success. It’s important to operate tight cash management, particularly when dealing with high inflation and rising costs.

    Where there are difficulties in maintaining a balanced cash flow, in order to prevent more money going out than is coming in, identifying what can be retained in the business to give breathing space should be the first step and allow more time to assess the options available.

    Further guidance on optimising your cash flow and cash flow forecasting can be found here
  • Profitability - It's important to understand the profitability of your business so you can identify what's working well and what's not, and make informed decisions. Short-term cash problems will often be caused by underlying profitability issues in the medium to longer term.
  • Management - It’s generally accepted that management strength is key to running a successful business. There are various ways of assessing people or management, including motivation, leadership, commitment and communication. Therefore if key personnel are unable to fulfil their role due to illness, accidents or change in personal circumstances, it could have an impact on the performance of the business. This is especially important in the case of sole traders and smaller limited companies.
  • External Influences – Macro Economic Factors - There are aspects of the economy that are out of our control and can impact businesses. The nature and location of your business, and type of product or service that you provide, will all affect how susceptible your business is to these fluctuating economic factors.

    Examples of such economic factors include but are not limited to:
    • Changes in Interest rates, Exchange rates and Tax rates
    • Inflation
    • Rising Business Costs
    • Supply- Chain disruption
    • Recession
    • Legal rules and regulations
    • Pandemics
    Any of these factors can arise or change at any time during a business’s lifecycle.

    HSBC can help and advise on how to prepare and put appropriate measures in place to deal with such changes, to reduce the impact on your business.

For additional guidance please also refer to:
Financial Fitness Hub
Financial Wellbeing for Businesses
Dealing with Rising Cost Of Living (for Individuals)
HSBC Wellbeing Guide

Please Contact Us immediately if your business is impacted by any of the factors outlined above and is experiencing financial difficulty, or going to fall into financial difficulty.

For independent debt advice please refer to Additional Support Services for details.

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