10 red flags professional services firms should act on immediately

Would you know if your fi rm has strayed into dangerous waters? Quick and easy access to the right Management Information (MI) can present red flags indicating your fi rm may be in trouble.

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RSM have compiled a list of 10 red flags to watch out for:

  1. Speed of preparation of your MI is greater than 45 days;
  2. Property costs are greater than 20% of turnover;
  3. Level of short term funding required is greater than 10% of turnover;
  4. Net debt is greater than 80% of net assets;
  5. Net debt is greater than 15% of turnover;
  6. Profi t impact of year-end adjustmentsgreater than 10%;
  7. Missed PY budget profi t by over 20%;
  8. Gross margins are less than 21% (for middle market fi rms);
  9. Net working capital days are greater than 180 days per year;
  10. Net working capital days have increased more than 20% from the prior year.

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