Starting a business can be fun and exciting, but it can also have its ups and downs. Your business might go through periods of growth where business is booming, but you also might see times when you’re not bringing in any money and your business is struggling to hang on. However, sometimes these financial issues are more than just temporary. Often times, there are underlying issue that cause financial struggles.
Here are some signs your business may be facing some serious financial struggles.
1. Cash Flow isn’t Flowing Smoothly – Cash flow issues are common throughout the life of the business – they’re even considered normal. What’s not normal is when these cash issues become a routine. These cash flow issues can have a number of causes, but some of the most common include smaller profit margins, loss of sales, theft and allowing accounts receivables to get too backed up. For help understanding cash flow, look here!
2. Tax Troubles – Ah yes, taxes. Just like individuals, businesses too must pay taxes. Businesses usually have income tax on the federal and state levels, as well as sales tax and employee taxes. When your business starts struggling to make these payments, something isn’t quite right. By not being able to pay taxes, a business can find itself falling behind on other financial obligations, and might even find themselves in some hot water with the IRS.
3. Mountains of Accounts Payable – It should go without saying that you need to pay your bills. Whether it be your vendors, your internet service provider or your cleaning company, these people need to be paid for their services. When you “pay” for these on credit, they go to the accounts payable ledger, and not paying them off can create quite a mountain of bills. Struggling to pay your bills is a huge red flag that your business is having serious financial struggles.
4. Aging Assets – Wear and tear happens – it’s part of a product’s life cycle. However, a lot of this can be prevented or lessened by working on the upkeep of your assets. By failing to take care of them, serious problems can arise. If you neglect your store front and let it look run down, this can turn customers away as it isn’t appealing. If you have manufacturing machinery that isn’t preforming smoothly anymore due to wear and tear, production may slow down, be incorrect or even stop altogether.
5. Bookkeeping Blunders – Bookkeeping is cool – it tells the story of where your business has been, where it is right now and where it could go in the future. Neglecting your books can lead to some serious financial complications. Without accurate records, you may not know how much money you actually have, and this can lead to uninformed decision making. Having accurate books can also help you discover any issues, such as fraud, that may arise.
6. Cobwebs in the Bank – When you have cobwebs in the bank – you know, an empty or really low account balance – your business can face some serious financial consequences. Having a low balance can lead to overdrafts, and overdrafts can lead to some nasty charges for spending money your business doesn’t have. If you keep encountering these fees and charges, you will just end up digging your business into an even deeper hole – one that may be impossible to get out of.
7. Missing in Action – There’s an old saying “when the going gets tough, the tough get going.” However, in your business, leaving is the last thing you want to do. Often times, when businesses face financial issues, the owners are hard to find or contact. They may be overwhelmed, or feel like a complete failure. However, this can just lead to more problems, such as a decaying reputation, confused employees and deterioration of the already terrible financial issues.
8. Inventory Issues – If you are selling products, you want them to fly off the shelves. When your products aren’t selling like hot cakes and are instead sitting in inventory for long periods of time, this could be a sign of a major problem. If you’re holding on to too much inventory and not selling it, you’re basically spending money on storage. If you sell products that could spoil, keeping them in inventory too long can result in losing money off ruined items.
9. Empty Handed Employees – Your employees keep your business running smoothly. When you’re not able to pay these precious assets, you know your financials are struggling. Not being able to pay your employees can result in them leaving the company and even bad-mouthing about how they were treated. This can lead to more reputation issues. Without employees, it will be tricky for your business to remain successful.
10. Profit Problems – As a business, your main goal is likely to make a profit. Profit, in its simplest form, is when you have more revenue than expenses. Although an obvious sign that your business is struggling financially, this is an important one to keep in mind. If your profits, such as gross profit, operating profit or net profit aren’t looking pretty, something isn’t right. Along with your profits, you want to have high profit margins, which signify what percent of your revenue actually turns into profit for your business.
Finances keep your business up and running, but when your business has financial issues, everything can come crashing down in a hurry. Luckily, our numbers nerds understand these money problems, and are ready to help you dig your business out of the deep, dark hole of financial struggles.