Not only macroeconomic structures but also individual commercial enterprises are affected by the disastrous effects of crises. The development of unfavorable trends in production over time can lead to a deterioration in the performance of the company, which often ends with its bankruptcy. One of the ways to prevent a crisis is to timely forecast and take into account the harmful factors of production itself and the external environment.
Instructions
Step 1
Use a systematic approach to forecast the crisis development of an enterprise. Such a qualitative analysis implies a comprehensive identification of the characteristics of economic activity that indicate a tendency towards bankruptcy. The presence of a number of indicators can become the basis for an expert opinion on the unfavorable course of development.
Step 2
Make a list of critical indicators for predicting the likely bankruptcy of an enterprise. As a basis, you can take a convenient two-tier system of characteristics, based on the recommendations of the Auditing Practice Synthesis Committee (UK).
Step 3
In the first group, include the criteria, the dynamics of which in the foreseeable future may indicate significant financial difficulties. First of all, these are:
- recurring losses in production activities;
- a high level of overdue accounts payable;
- low values of liquidity ratios;
- chronic shortage of working capital;
- regular failure to fulfill obligations to shareholders, investors and creditors;
- deterioration of relations with banking institutions serving the company.
Step 4
Pay attention to the inclusion in the practice of the enterprise of the use of new sources of financing, and on unfavorable terms. For forecasting the crisis, it is also important to use equipment with long-expired service life in the main production process. A decrease in the order portfolio, including the loss of long-term contracts, also indirectly indicates the approach of an unfavorable outcome.
Step 5
In the second group of pre-crisis benchmarks, include the loss of key management personnel; insufficient diversification of the company's activities, which is expressed depending on the results of one type of equipment or type of assets.
Step 6
Keep under control such qualitative parameters as participation of the company in litigation with deliberately unfavorable or unpredictable outcome; underestimation of the technological renewal of the enterprise; long-term contracts and agreements that have become ineffective.
Step 7
Conduct a quality peer review according to the mentioned criteria. For this purpose, it is possible to involve both specialists of various profiles within the company and independent consultants, including audit firms. The final assessment of the potential state of the enterprise as pre-crisis is made by the governing body, based on a comprehensive and comprehensive assessment of the parameters made by specialists.
