Accountant gives suppliers 10 warning signs of retailers in difficulty

Thames Valley and south coast accountant and business advisor, James Cowper, has put together a list of the 10 most common warning signs of potential trouble in a retail business, following the collapse of a number of leading retailers over recent weeks.

The demise of home store, Habitat, and fashion retailer, Jane Norman, together with the store closures at Thorntons and the imminent collapse of Homeform, are leaving suppliers wondering when – or even if – they will get paid, says the company.

Peter Whalley, a partner and corporate restructuring expert at James Cowper, said: “The collapse of a number of household retail brands points to one thing – the retail sector is not faring well.
“We may technically be out of recession, but consumer confidence is fragile and people are cutting back on spending, which means that for those businesses in the retail supply chain there could be a worrying few months ahead.
“It is therefore vital suppliers safeguard their own business as much as possible should one of their retail customers go into administration, particularly if they do not have, or cannot, secure credit insurance.”
The top 10 warning signs are:
1. Requests for extended terms or increased credit limits, slower payment of trade accounts, part payments and, worse still, payment of round sum amounts
2. Repeated excuses for late payments – such as unavailability of executives to authorise payments, IT problems or clerical errors by the accounts department (or the bank)
3. Increasing disputes over deliveries, quality control issues or missing paperwork
4. Low morale among junior employees and high staff turnover, particularly, within the accounting function
5. Trading down-market to carry lower-quality product brands or ranges, late orders for seasonal products and excessive use of rummage sales
6. Tired or run-down outlets in need of refurbishment
7. Widespread shop closures
8. Reduced credit ratings with credit agencies and insurers
9. Profits warnings in the financial press, poor profitability or excessive debt levels in filed accounts and/or late filing of financial statements
10. A revolving door to the chief executive’s office

Whalley said: “By being quick to spot any warning, businesses can act fast to protect themselves. Monitoring the financial press for profit warnings, shop closures, negotiations with landlords or with finance providers and reading about sales of the whole or parts of the business will give a good idea a retailer may be going through a sticky trading period.”