16 May 2007  
 
In the wake of major Australian corporate collapses such as Westpoint, Westbus, One.Tel and HIH Insurance, insolvency industry expert and Partner for Corporate Reorganisation Group at Deloitte, Paul Weston, recently gave his insights into the ‘underbelly’ of Australian businesses in a presentation at the Institute of Chartered Accountants in Australia’s annual Business Forum. 
 
Mr Weston discussed the warning signs and intrinsic indicators that identify businesses in decline and perhaps facing a corporate collapse. 
 
“Many businesses, particularly in the small to medium enterprise (SME) market, find it difficult to discuss poor performance and quite often bury their head in the sand, however there are a number of indicators that should be reviewed in order to understand and improve the health of a business,” Mr Weston said.  
 
Mr Weston went on to discuss the need for businesses to monitor all warning signals including profits, profit volatility, borrowings and benchmarks before making a decision on the future, some of the warning signs he discussed included: 
 
Non-financial warning signs include:

1. The ATO / Super payments among other simple things are not being paid on time and are being used to fund business operations
2. Payments are made in random amounts or subject to repayment agreement
3. Rent and lease payments are not being paid on time
4. Legal action has been threatened by creditors
5. Late audited accounts
6. Loss of key long term staff
7. Slow in providing financial information

1. There is a history of losses
2. Decreasing quality of asset base
3. Increasing sales and decreasing gross profit margin
4. Large order cancellations or change in suppliers
5. Payment of interest or service charges without reducing the principal on debt
6. Fall in turnover
7. Changes in payment patterns