Key takeaways
- Crises usually develop in stages from strategic to earnings to liquidity crisis, and with each stage the available options shrink.
- Early warning signs include overdue receivables, stretched supplier payments, fully drawn credit lines, lost key customers and repeatedly missed plans.
- The first steps are transparency, a rolling weekly liquidity plan and early talks with banks and shareholders, backed by a plan.
- In a crisis, an interim manager brings an unobstructed view from outside and the willingness to take decisions in the line.
Contents
Business crises rarely arrive overnight. They usually announce themselves well in advance – in key figures, in the behaviour of customers and suppliers and in plans that are missed again and again. If you take these warning signs seriously early on, you still have room to act. If you wait until the account is empty, you lose it.
01How a crisis develops
Business management commonly distinguishes between three stages that build on each other:
The business model loses strength – through new competitors, changing customer needs or new technology. Often, little of this shows in the figures yet.
Revenue and margins fall, losses arise. Equity is eroded and reserves shrink.
Solvency is under threat. Little time is left now, and every decision is made under pressure.
The earlier a crisis is recognised, the more options remain. In a strategic crisis, there is still time to change course; in a liquidity crisis, it is often only about securing the company.
02Operational warning signs
Many signals appear in day-to-day business long before the annual financial statements make them visible. Pay particular attention to:
- Overdue receivables are rising, and customers are paying noticeably later.
- Supplier invoices are paid later and later, and early-payment discounts are no longer taken.
- Credit lines are permanently drawn, and the bank is asking more questions.
- Key customers are lost or reduce their volume.
- High performers and managers are leaving the company.
- Plans are missed regularly – and the turnaround is pushed further into the future each time.
03Why companies often react too late
When management and shareholders react late, it rarely has to do with a lack of competence. More often, certain patterns are at work: people get used to bad news and explain each item away as a one-off. Hope for the next big order replaces sober planning. Current, reliable figures are missing because reporting is too slow. And talking openly about a crisis feels risky – towards the bank, the team and customers. The result is always the same: valuable time is lost.
04The first steps
When the warning signs become more frequent, the right sequence matters:
- Create transparencyCreate transparency: an honest picture of liquidity, costs, order book and earnings drivers.
- Plan liquiditySet up a rolling liquidity plan on a weekly basis and update it continuously.
- Secure liquidityTake immediate measures to secure liquidity: prioritise payments and collect receivables consistently.
- Involve stakeholdersTalk to banks and shareholders early – with figures and a plan, not just the problem.
- Restructuring planDevelop a restructuring plan that tackles the causes, not just the symptoms.
Practical tip
Go to banks and shareholders with figures and a plan, not just the problem – and do it early, while there is still room to act.
05When interim management helps
In a crisis, an experienced interim manager brings two things above all: an unobstructed view from the outside and the willingness to make decisions in a line role. Typical situations:
- Management is tied up in day-to-day business and has no capacity for liquidity management and restructuring.
- Banks or shareholders expect an experienced person to take ownership of the plan.
- The team lacks crisis experience – in liquidity planning, cost adjustment or negotiations, for example.
- After stabilisation, the business model needs to be realigned.
A clear division of roles is important: the interim manager takes on responsibility within the company, while legal questions stay with specialist legal counsel.
06In practice
At 7StepsSolution, as interim COSO in a financially tight phase, Jens Schneiders first created transparency on liquidity, cost structure and earnings drivers, then rebuilt liquidity planning and cash flow management and refocused the business model on viable sources of revenue. As managing director of erlebe-fernreisen during the Covid crisis, he managed the cash position daily and negotiated financing options with banks and shareholders.
Jens Schneiders
Interim CEO for mid-sized companies, scale-ups and corporate ventures. Transformation. Restructuring. Stabilization. Handover.