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Is Your Company As Healthy As the Food You Process?


As a food manufacturer, you understand that processing the best products is just one part of successfully navigating the course. According to Andrew Raphael, director of MNP’s Food & Ag Processing, processors must understand and anticipate the myriad complex factors that directly impact their business in order to stay healthy and competitive, while effectively navigating the road ahead.

“There are a multitude of interrelated, changing global dynamics that directly impact a food processor’s business,” says Raphael. “These include dealing with the strong Canadian dollar, fluctuating energy and ingredients costs, demographic changes, regulatory issues, safety concerns, the increase in imports, government regulation and the ‘thickening’ of the U.S. border. These are all areas MNP helps our clients with.”

With so much to consider it’s not surprising that many food processors miss the warning signs regarding the health and management of their business. Grant Bazian, who heads up MNP’s Corporate Restructuring and Insolvency practice, consistently sees this problem. “Before companies know it they’re no longer in control of their business or driving the bus — and controlling the fate and destiny of the company,” says Bazian. “Fortunately, there are some general warning signs that, once you’re aware, can prompt action and help you mitigate the damage, recover sooner and stay in the driver’s seat.”

What are the warning signs?

If your company is facing litigation, it can be a very large red flag that it’s time to get help. Customers may pursue litigation, causing your company uninsurable financial loss and draining your working capital. Equally serious are actions and litigation by creditors.

“A Notice of Intention to Enforce Security issued by a secured creditor, Demand Letters issued by unsecured creditors or a seizure of assets, are just some of the issues you could face — causing you to hit the brakes,” explains Bazian. “Another troubling sign is the build up of unpaid statutory debts, including CRA source deductions or GST/HST and unpaid wages and holiday pay.”

Other warning signals may be written off as the ups-and-downs of business, but could be more serious. Deferred maintenance on capital assets, depletion of inventories or the sale of income-producing assets could all be signs of a mismanagement of assets.

“Seasonal fluctuations in food processing are not uncommon, but if you’re seeing recurring monthly losses or declining gross profits or sales, it could signal a lack of profitability issue,” says Bazian. The same goes for liquidity or cash flow problems — stretching accounts payable and cash on delivery, aging accounts receivable or significant uncollected accounts, long-term debts coming due, or constantly being at or over authorized lines of credit.

Bazian says people problems are often the easiest warning signs to miss or underestimate. “But don’t be fooled — these can topple a business, too,” he adds. A number of factors can lead to the loss of key customers or key employees, including the economy, competition, federal grants or changing demographics.

Time for a check up

“The reality is that you can look at any line on your balance sheet and it could signal that your business is in trouble,” says Bazian. “Any one thing can be the tipping point for your business, depending on its severity and the timing.

The good news is that by being aware, by not waiting to react or reach out for expert advice, you can maintain control and start working to get your business out of trouble and back on course.” Adds Raphael: “A regular diet of proactive checkups on the health of your business will help ensure it is as healthy as the food you process.”

Andrew J. Raphael, MA Planning, is the Director of Food & Ag Processing at MNP; Grant Bazian, CIRP, is a Trustee in Bankruptcy and Leader of MNP’s Corporate Restructuring and Insolvency practice. For more information on what MNP can do for you, contact Andrew at 1.877.688.8408 or [email protected]

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