The accountant is at the front line of warning signs that there are dark days ahead for the company. What are these signs? We spoke to the chartered accountant Marc Bergeron, Vice-President and Partner in Recovery and Insolvency of Raymond Chabot Grant Thornton (RCGT).
You are working as an accountant in a company. Everything seems to be going well until the day when the financial situation shows some signs of slowing down… Do you need to worry? Should you talk to the leaders? Here’s how to know.
Signs of financial problems
Although all companies go through difficult times, certain indications of a declining financial situation don’t lie. “A liquidity problem, that is, not having enough cash to meet your commitments, is the first disturbing sign,” says Marc Bergeron. Them there may be other concerning signs, such as a marked decrease in business volume, repeated earning shortfalls, late payments of taxes, loss of a major customer or the departure of the best employees, especially in the finance and management departments.
Problematic reactions
When these various alarm signals appear, accountants are responsible to inform the company’s executives. How do they usually react? “Many of them deny the situation,” Mr. Bergeron says without hesitation. “They would like to believe that their accountants and bankers have made a mistake… That said, in the course of my career I have never seen a banker mistaken.” In this case, how do you explain the tendency of entrepreneurs to put their head in the sand? According to the expert, the main reasons are:
1. pride: seeing their entrepreneurial fairy tale turning into a failure tale, the leaders prefer to nurture the illusion that their financial difficulties will disappear by themselves, as if by magic
2. lack of distance: unable to see the woods for the trees, the entrepreneurs struggle to see clearly. That is why they benefit by surrounding themselves with a team of confidants who will “sound the alarm”.
3. fear of consequences, such as restructuring, layoffs and bankruptcy.
Solutions to the problems
If things are not going well in the finances of the company where you work, be aware that there are remedial services to regain profitability. Of course, the earlier the you take action as an accountant, the more likely it will be that the damage can be repaired. The question is then to know whether, after having the courage to inform the leaders of the situation, they will have the courage to listen to you, recognize the difficulties and call on those who can help them.