Running a small business is everything but an easy task. If you are a small business owner, then you understand that you have to work hard to ensure that your business will succeed. One great way to achieve success is by actively monitoring the following red flags, indicating that your business might be in trouble:Low Cash Reserves: If you do not have enough money to cover expenses, you and your business will quickly suffer the consequences. Prepare accurate financial statements (i.e. Income Statement, Balance Sheet, and Cash Flow Statement) on a monthly basis and review them frequently to anticipate any problems. The best way to maintain cash reserves at an appropriate level is to continuously monitor income and expenses. If you don't have time to properly manage your income, consider hiring an accountant or purchasing software such as Quickbooks.Declining Sales: Monitor closely any decline in your sales and ask yourself: Why has there been a decline? Internal or external factors such as the ones listed below might be affecting your business. Internal: Decrease in quality of product, poor service, limited marketing/advertising, personal issues, limited resources to fill orders, or small staff. External: Weather, increased competition in the market, alternative products available, or a general decline in the economy. Too Much Borrowing: Borrowing money to make payments of other loans or to pay off debts is almost always a red flag. Analyze the situation and try to find ways to reduce your dependence on borrowed funds to pay down your debts. Borrowed money should be used to invest in your business in such a way that will yield dividends down the road. Research should be conducted to verify that the funds from the loan will either save you money or increase sales.
Making Late Payments: If you are consistently making late payments, you are most likely experiencing problems with the cash flow of your business. Try to find ways to reduce your expenses and to increase your revenue, as the cost of late payments can add up quickly. If you are making regular payments but always a few days late, try cutting back in other areas to bring your account current and then continue making those regular payments.
Please visit www.accionusa.org for more information to help get your business back on track Tips to Get Your Business Back on Track: Be Honest. Always make sure to be honest with your suppliers and lenders. If you are honest with them, they will recognize your high level of responsibility and might be more willing to work with you to figure out a payment plan. Improve your Cash Flow: Consider ways to increase your business revenue and reduce all unnecessary expenses. Visit www.accionusa.org for some ideas about how to improve your Cash Flow.Build a recovery plan. Always make a plan outlining the steps you will follow to get your business back on track. Monitor the plan weekly.
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