Why entrepreneurs miss them and banks act on them immediately
In the landscape of Italian entrepreneurship, small and medium-sized enterprises (SMEs) dominate the economy. They generate the majority of employment and innovation, yet they are also among the most fragile. The last decade has exposed this vulnerability: a mix of low growth, unstable markets, and restricted financing has pushed thousands of companies into difficulties. For many of these firms, the problem was not the lack of customers—it was the inability to read the early financial signs of a looming crisis.
The Blind Spot of Entrepreneurs
Alessandro Merenda, an accountant and corporate advisor specializing in distressed companies, has spent years observing this recurring dynamic. He explains that entrepreneurs often focus on what feels most tangible—sales, profit margins, and day-to-day liquidity—while ignoring subtle but decisive warning signs. These are the signs that banks, armed with sophisticated internal monitoring systems, detect long before an entrepreneur realizes the business is at risk.
“Businesses do not collapse overnight,” Merenda notes. “There are always indicators. The issue is that most entrepreneurs are not trained to recognize them. Banks, on the other hand, are experts at seeing them and adjusting their trust accordingly.”
Reading the Signs Before It’s Too Late
In his book Revive Your Company Through Numbers (Autoritas Editore), Merenda outlines several overlooked signals that can anticipate corporate decline. Among them:
- Bank scoring systems: internal codes banks assign to companies to assess their reliability. These classifications, rarely known by business owners, are key to determining whether credit will continue or be withdrawn.
- Subtle messages from banks: what may sound like polite, generic comments can in fact be coded warnings that credit lines are about to tighten.
- Unappreciated figures in financial statements: data beyond the bottom line—such as liquidity ratios or debt structures—that reveal far more about the company’s ability to survive.
- Psychological traps: misplaced optimism or denial that push leaders to make poor decisions even when headline results look positive.
Recognizing these factors in advance is not just an accounting exercise—it is a matter of survival.
A Matter of Culture as Well as Finance
The challenge, however, extends beyond numbers. Italy’s business environment is characterized by strong family traditions and entrepreneurial creativity, but financial literacy often takes a back seat. Unlike in Germany or the UK, where structured training in finance is common, many Italian business leaders come from technical or artisanal backgrounds, with limited preparation in reading financial indicators.
The pandemic made these weaknesses impossible to ignore. Thousands of SMEs that might have endured with better preparation instead disappeared, often because their leaders did not know how to interpret financial red flags until it was too late.
Merenda argues that the real change Italian entrepreneurs need is cultural: “The key shift is not only in the numbers themselves, but in how leaders interpret them. Once they learn to decode financial signals, they move from being passive actors in their company’s destiny to proactive decision-makers.”
A Practical Roadmap for SMEs
Revive Your Company Through Numbers was written precisely to address this gap. The book avoids academic jargon and instead provides:
- Practical explanations of banking criteria and codes.
- Concrete case examples showing how financial missteps evolve into crises.
- Tools to help entrepreneurs evaluate the health of their businesses with clarity.
- Strategies to adopt a mindset focused on anticipation rather than reaction.
Its ambition is simple but essential: to help entrepreneurs sleep more peacefully, knowing they have regained control of their numbers and, with them, their future.
Why International Readers Should Pay Attention
Although Merenda writes from the Italian context, his lessons resonate well beyond national borders. Around the world, SMEs remain vulnerable to credit restrictions, global supply shocks, and management blind spots. A 2022 European Central Bank survey revealed that over half of European SMEs view access to finance as one of their greatest obstacles. In this respect, the Italian experience offers a valuable case study in what happens when cultural habits prevent leaders from engaging with financial reality early enough.
For international entrepreneurs, the message is clear: financial resilience depends less on having perfect balance sheets and more on learning how to interpret the hidden messages within them.
Corporate collapse is rarely sudden. It is usually the final stage of a process filled with subtle warnings that, if recognized in time, could change the outcome entirely. Entrepreneurs who learn to “speak the language of numbers” can anticipate risks, protect their companies, and build a foundation for long-term growth.
Merenda’s book offers a structured yet accessible roadmap for this shift. For any SME leader, in Italy or abroad, it provides a reminder that survival—and success—begins not with instinct or luck, but with the ability to decode what the numbers are already saying.
✍️ By Alessandro Merenda, accountant and business advisor specialized in corporate crisis recovery
Sources:
- Merenda, A. Revive Your Company Through Numbers. Autoritas Editore.
- OECD (2023), SME and Entrepreneurship Outlook.
- European Central Bank (2022), Survey on the Access to Finance of Enterprises.
