SMEs in financial difficulty: why silence can be harmful

Running a business means taking on daily challenges: managing customers, supporting your team, investing in growth, facing up to the competition… But even with all the will in the world, no one is immune to financial difficulties. Some managers prefer to keep quiet, for fear of being judged or worrying those around them. They tell themselves that “It’ll get better” or that they’ll manage to find a solution on their own.

But this silence can be costly. The longer you wait, the more debts you accumulate, and the more your partners lose confidence in you. Ultimately, the options for recovery are reduced.

Why is it difficult to talk about financial problems?

There are many reasons why business owners find it difficult to open up about their financial difficulties:

1. Fear of being judged

   Many entrepreneurs think that admitting to difficulties is tantamount to admitting that their business is poorly managed. Yet the causes of poor management are often beyond their control: rising costs, inflation, late customer payments…

2. The shame

   Saying you can no longer pay your creditors may seem humiliating. But in reality, the vast majority of SMEs sooner or later experience more difficult financial times.

3. Isolation

   Many managers also fear disappointment. This weight becomes heavy, increasing stress and delaying the search for help.

4. The money taboo

And of course, talking about money, and especially debt problems, is still a taboo subject, whether for an individual or a company.

The effects of prolonged silence

Saying nothing can have serious consequences:

• Lack of liquidity: debts grow faster than revenues.
• Loss of confidence: suppliers, employees and financial institutions doubt the company’s solidity.
• Increasing stress: anxiety and fatigue affect the entrepreneur and his decisions.
• Bad decisions: without a plan, you may cut in the wrong places.

Breaking the silence is not a sign of weakness. It’s a sign of courage and leadership. Partners and creditors appreciate entrepreneurs who are transparent and seek solutions before it’s too late.

Solutions to restore balance

1. Consult your financial statements regularly
   

   First of all, prevention is better than cure. Learn to spot the red flags in your financial statements that could help you turn things around quickly. If you know where to look, it’s fairly easy to identify emerging problems.

2. Get a clear picture of the situation

   Put your figures on paper: income, expenses, debts, cash flow. This simple step will help you see the situation more objectively.

3. Talk to your creditors

   Many suppliers and institutions prefer to maintain a long-term relationship rather than lose a customer. Often, it is possible to negotiate:

   • a more flexible payment schedule
   • a temporary reduction in interest rates
   • postponement of certain deadlines

4. Give yourself a realistic plan

   A well-defined plan reassures everyone. It can include :

   • better cash management
   • prioritization of essential payments
   • strategies for generating new income
   • adjustments in supply or pricing.

5. Involve your team

   Without going into too much detail, you can explain the situation to your key employees. This will boost their confidence in you and avoid rumors. A mobilized team can also find solutions to reduce costs or improve revenues.

6. Consult an expert

   It’s the role of a Licensed Insolvency Trustee to help you solve your debt problems. He or she will help you to :

   • Review your budget: this may involve cutting certain expenses and implementing a strategy to improve profitability.
   • Draw up a financial recovery plan: he’s also your best ally in getting the business back on track. After analyzing the situation, he or she will propose a strategy that includes several recovery measures, and may also help you negotiate with your creditors.
   • Filing a formal proposal: there are several ways to settle a company’s debts. Bankruptcy is not the only option. The trustee will help you find the best option for your situation.

Regain confidence in yourself and your company

Financial difficulties don’t make you a bad entrepreneur. They’re a fact of life for people in business. What makes the difference is how you react. Seek help early to protect not only your business, but also your health and your relationships.

Worried about the financial health of your small business? Contact one of our Licensed Insolvency Trustees! He or she will guide you with empathy and respect, and propose solutions tailored to your reality.