Ten Red Flags that Signal Financial Distress in Business Customers

Many businesses are still recovering from the COVID-19 pandemic, from contractors facing supply chain disruption to cinemas winning back audiences and department stores competing with online shopping. Business bankruptcy filings have been rising, pushed up by higher interest rates and inflation.

Whether a business is your customer, supplier or borrower, judging its financial health is key to the relationship. This 60-minute webinar sets out ten red flags of financial distress that help you spot ailing firms before they file for bankruptcy protection.

You'll see how the warning signs connect, such as a change in ownership and management, employee turnover, falling liquidity and slower trade payments, and what action to take to limit the impact of a possible failure.

• Identify ten red flags for spotting, evaluating and monitoring financial distress
• Assess a firm's financial condition, operating performance and credit standing
• Recognize organizational, ownership and adviser changes that signal trouble
• Explain how the red flags interconnect
• Take appropriate action to reduce losses from a potential failure

• Red flag 1: an ailing industry
• Red flag 2: declining financial condition and operating performance, including falling sales, gross margins and net profits, and shrinking liquidity, rising leverage and eroding solvency
• Red flag 3: organizational volatility, such as management and director turnover and employee layoffs
• Red flag 4: changes in professional advisers, such as the law firm, accounting firm or insurance agent
• Red flag 5: asset disposition
• Red flag 6: change in ownership
• Red flag 7: credit deterioration, such as COD terms, judgments, liens, overdrafts, default and foreclosure
• Red flag 8: declining communication
• Red flag 9: major casualty loss from weather or climate events such as fire or flood
• Red flag 10: negative media coverage, including complaints, poor online reviews, lawsuits and arrests
• How the red flags interconnect
• Actions to reduce the impact of a potential failure

Your organization's links with its own suppliers and customers expose it to losses from both directions. Ongoing economic volatility means creditors and lenders need to look at the depth and breadth of a borrower's supply chain, including substitutes, alternate suppliers, trade credit costs, transportation and delivery times.

The session suits credit managers, AR teams, finance directors and CFOs, sales and account managers, business owners, risk managers, commercial lenders, trade credit insurers, procurement leaders, investors and analysts.

• Credit Managers
• Accounts Receivable (AR) Teams
• Finance Directors and CFOs
• Sales Managers and Account Managers
• Business Owners and Entrepreneurs
• Risk Management Professionals
• Commercial Lenders and Bankers
• Trade Credit Insurers
• Procurement and Supply Chain Leaders
• Investors and Financial Analysts

A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek principal of Devon Risk Advisory Group based near Atlanta, Georgia.  Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc.  Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC).  PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are more appropriate for privately held firms.  He also serves as the PCC’s representative to FASB’s Credit Losses Transition Resource Group supporting the new current expected credit loss (CECL) standard to be implemented in fiscal year 2019 for public companies and 2020 for private firms.

The former SVP and senior credit policy officer at SunTrust Bank, Atlanta, he was responsible for developing, implementing, and administering credit policies for SunTrust’s wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking and private wealth management. He also spent three years as managing director and credit approver in SunTrust’s Florida commercial lending and corporate investment banking areas, respectively. Prior to SunTrust, he was chief credit officer for Barnett Bank’s Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, his experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor.

A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, Dev earned his M.B.A. from the University of Hawaii. Mr. Strischek serves as an instructor in several banking schools, including the Stonier Graduate School of Banking, and the Southwest Graduate School of Banking. His school, conference, and workshop audiences have included participants drawn from the ABA, RMA, OCC, Federal Reserve, FDIC, FFIEC, SBA, the Institute of Management Accountants (IMA) and the AICPA.

Mr. Strischek has written some 200 articles on credit risk management, financial analysis and related subjects, and he is the author of Analyzing Construction Contractors and instructor of  a contractor analysis workshop. A past national chair of RMA and former RMA Florida Chapter president, Dev has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department’s Financial Service Volunteer Corps (FSVC).