Be on The Look for The Following 8 Signs of Financial Set Backs in Your Business
Small businesses have been known to face a lot of financial hurdles while growing. This can be due to many reasons. Some of which may be entirely out of your hands such as being involved in an industry which is seasonal in nature. Other factors can, however, be attributed to the business owners.
A well-managed business is one where all the financial books are updated continuously and controlled and can easily weather a financial storm. But then again, as the business owner, you will still have to address the other major underlying issues if you wish to see your business even stand a chance of surviving. Here are some of the common signs that your business may be suffering financially.
1. Deteriorating Assets
It is common knowledge that almost all businesses rely on some physical assets to provide their products or services to their customers. And it is for this reason that you need to continually keep these assets up and running and in good shape. The moment you see a business start cutting corners on production assets and maintenance, chances are that the consumers of the business products or services will decrease. This can end up making the business’s financial situation worse.
2. Poor Profits
In most instances, you find that poor profits are always among the first signs to prove that a business isn’t doing that great. The moment you see your business struggling to sustain itself, then soon it might be forced to start raising capital externally. But doing so will increase the business risk and also lower its creditworthiness with the creditors like Lend Green, investors, bankers, and suppliers alike. This will eventually limit your business’s access to funds which will ultimately lead to its failure.
3. Negative Cash Flow
A negative cash flow statement means that your business is spewing out more cash at any given time than it is generating. And that means that you are operating at a loss every time your business is operational. So, the moment you notice that your business cash flow statements are running negative, know there is a serious problem somewhere.
4. Failing to Pay Employees
This is considered to be the worst stage of all. When you notice that a business is continually failing to pay its employees. Or see that the employees’ payroll checks keep bouncing. There is no way an employee will continue working for you and your business if he/she does not trust you to pay him/her when the payday comes due. To some extent, this action is also considered as theft and may end up harming your business even more.
5. A Decline in Sales Growth
A positive sales growth means that your chosen market has accepted your products or services and is using it. But in situations where you notice there is no sales growth despite your efforts in marketing activities, it only means that your target market is not satisfied with what you are selling. This will inevitably lead to your business shutting down.
If your business has many overdrafts at a time, then you should know that it is in big trouble. It is quite similar to what happens when an individual’s bank account has overdraft charges. These can have adverse rippling effects which can even cause some of the payments to be missed and end up accruing additional charges. It will also have you on the wrong side of the table with the vendors.
7. Bowing to Cover Shortfalls
A business that has gotten into the habit of borrowing is one that is already at a point where it finds it difficult to sustain itself. Such a business may not be viable in the long-term basis.
8. Cash Flow Problems
It is no doubt that almost all businesses face cash flow issues at one point. But if this becomes a periodic trend, then it can be bad for business. It can lead to other bigger underlying issues that destroy the business in the long run.