As a business leader, it can be challenging to keep up with everything that's going on. Your focus may be sales or attracting venture capitalists. You may be the creator of your product or service and spend more of your time manufacturing what you're selling. Whether it's an upcoming recession or lax accounts receivable management, you'll want to know if your business is in trouble.
Here are 5 signs to tell if your business is headed for financial straits.
Cash Flow is Cash Low
Even if your client load is amazing and your customers keep coming back for more, you have found that your cash flow is in the red more times than not. Your business may feel successful if you're busy filling orders but if you're not able to meet your financial obligations, it's a sure sign that your business could be headed for a fall.
The Need to Charge More
You may have deeply discounted your prices to get clients interested and now you're feeling the brunt of that decision. If you're suddenly feeling the need to charge more for your product or service, this may be the time to make that change. Catch it early enough and you can still keep your prices at a rate that retains your customers. Raising your rates too quickly due to panic could scare them away.
Steps to Have a Successful First Year in Business
Being Credit or Loan Dependent
When it comes to paying your bills or keeping up with working capital, you're beginning to lean more on credit cards or loans. This increased reliance on borrowing is unsustainable and will be a bigger drain on your business later.
Inability to Hire
If you have enough customers that you're feeling like it's time to hire your first employee, this would seem like an awesome problem to have. It's not so awesome to realize that you're overworked but do not have enough cash to pay yourself or any other employees, for that matter. Without enough to pay a new employee, it's definitely not the right time to hire.
Best Practices for Organizing Small Business Accounting
No Awareness of Business Finances
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Consider the following questions:
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Have you looked a reports to determine the financial status of your business?
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Do you have a budget for your business?
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How are you forecasting the capital needed to sustain or grow?
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Are your customers paying their accounts in a timely manner?
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Are your credit policies too lenient for clients who cannot pay?
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When is the last time you looked at your cash flow statement?
For starters, find an accounting software package that can help you get organized. Enter all of your records to get a clear picture of your business' financial standing. Work with an accountant or financial advisor to get on the right track to success. A debt collections company can help with collections if customers haven't paid on time. They also offer the option to clean up your accounts receivable and work with you to implement best practices.
Once you have an idea of where you are, you'll have a better plan for success instead of financial straits.
Have questions? We have knowledgeable CPAs on staff who can help. Contact us.
