You have had a great year moving product off the shelves. You are eager to restock but when you check in with your bank accounts you are shocked at what you find. You do not have the money you thought you had to cover the costs for replacing your inventory let alone to cover your other bills! How did this happen? Panicked, you realize you must figure out where all that money has gone, and you fear a missed opportunity to sell that popular product.

Not every business owner is aware that they are struggling. They are blinded only by the number of sales they make but there is so much more to be aware of than just sales when running your company. Learn to recognize these signs of a struggling business:

  1. Bank View
  2. Overdraft is always at the limit
  3. Repeated NSF cheques
  4. Bank refuses to increase your overdraft limit
  5. Bank refuses to provide a loan
  6. Your bank wants personal guarantees
  7. Reporting Warning Signs
  8. You have not filed you tax returns and all-important documentation to the government and incurred penalties
  9. You have no idea how to do financial reporting
  10. Creditors are after you
  11. Cash flow is tight and paying creditors is difficult
  12. Can’t get stock because you have insufficient fund to pay for stock
  13. You are unable to get new credit
  14. You don’t meet agreed payment terms
  15. Who owes you money?
  16. You have no idea how much money is owed to you
  17. Troubles in Office
  18. Are you the only person on staff?
  19. Staff can not get along
  20. Lack of information and communication about finances
  21. Concentrating on non essential issues
  22. Senior staff not doing their jobs
  23. You have no idea about;
  24. Gross profit
  25. Costs
  26. Sales per month/per annum
  27. Orders taken
  28. Bank balances
  29. Your market
  30. Where most of the work comes from
  31. Where majority of profit comes from
  32. Key business statistics such as how many units of product you make per day, at what cost and how many people it takes to make this product (to name just a few key stats).

These are just a few indications in a long list of warning signs that every business owner should be on alert for. Now how do you turn things around? Learning to recognize these signs is important and taking some of the following actions may help you get yourself out of hot water.

  1. Be realistic

You have faith in your product. You trust that your business model is on point. You believe that things will work out in the end. While those are great qualities to have as a business owner, it often blinds you to the realities of running a business. You need to look objectively at the financial status of your company. What are the trouble areas? Where are you likely to hit financial challenges? Review your business as IT IS not just as how you want it to be.

  • Communication

Employees are often the first to see financial red flags long before the owner does. Communicating regularly with top level operations personnel and managers is a great way to bring issues to the forefront.

  • Hire an Accountant

Many small business owners try to save money and handle the accounting on their own. This is never a good idea, while the temptation to save money is strong, your desire to know how well your business is doing financially should be a priority. Hiring an expert to monitor your finances is necessary for your business if you want to succeed.

  • Review financial regularly

Now that you have a reliable management team and financial advisor at your disposal, utilize them! Review the reports that they provide you. If reading financial reports is not your strong suit, turn to your trusted accountant to have them make sense of it for you.

  • Growth Patterns

Every quarter compare your rate of sales growth to the previous quarter as well as year to year. Are sales dropping? Look for ways to get those numbers up long before sales grow stagnant.

  • Accounts receivable delays

Sometimes our customers can hold us back when they don’t pay their invoices on time. If turnover is lower than in previous periods, be proactive and start collecting what is owed. If left on its own, you can be sure there will be trouble ahead.

  • Cash Flow

One of the biggest reasons for businesses going under is lack of cash flow. You need to always have enough cash on hand to cover your overhead or you will fail. Work with your accountant to figure out just how much money you need to operate your business and find ways to make sure you have that money available.

Every business owner at one time, has been plagued by some or all the warning signs. The ones that come out on top however, are the ones to work tirelessly to find solutions to the problems. They ask for help where needed and learn more about their business than just selling their product or service.