Everybody likes to learn about successful businesses, but there never seems to be the same enthusiasm to discuss the subject of business failure. Ironically, we can learn far more from business failures than we can from successes.

During extensive research completed by Lana Simmonds, IT director of Affinitus Group, for her MBA in finance back in 2012, looking into

why businesses fail, many business owners told us that they already know the reasons and that we cannot tell them anything new in this area. And yet, this knowledge did not stop the same business owners from repeating the same mistakes and jeopardising their company’s future. So, what did our research tell us were the main reasons for business failure?

The research, conducted with more than 100 SMEs and ex-business owners, indicates that the majority of businesses fail mainly because of internal issues within the company.

Not surprisingly, a weak management team was one of the main factors that can cause business failure. An unreliable and inexperienced management team with a limited knowledge in certain important subjects like financial management, business planning, customer relations or marketing can cause a huge amount of damage to a business within a short time frame and those same inexperienced people may not be monitored and the damage allowed to continue.

To correct this, business owners need and must monitor the basic performance information almost on a daily basis and not just believe what they hear from those employed around them.

The second major factor was poor cash flow management. This factor is accountable for a vast majority of business failures. Inefficient credit control is a main variable that effects the cash flow position, it leads to an increase in late payments and bad debts and consequently to the reduction of working capital and puts pressure on all areas of the business. Therefore, a good credit control system should form an essential part of any business.

Our research gave us an understanding on how important it is for our customers to have an effective business management system that provides them with the necessary tools to monitor company performance, complete efficient credit control and control product prices and costs, and ultimately changed the way in which we looked at what our own company could provide to our clients within the fresh produce and food industries.

Before, we were providing them with software that would run their business and process all their transactions; our latest versions and those in development are designed to include the ability to monitor the business and make informed decisions. —