Sometimes it can be difficult to see the bleeding obvious, even if it’s right in front of your face. This can be especially true for business owners, whose judgement can be clouded by the very nature of their relationship with their business. So, here are the ten early warning signs your small business might be under pressure.
Given the current economic conditions, every business owners needs to be aware of the early warning signs that indicate their business is under pressure.
Many small businesses that have ended up in liquidation could have seen a better result if the owner had acted when they’d noticed the preliminary signs.
Here are some important things to look out for in your business over the next 12 months. Some might seem obvious, but in the early stage of business failure denial can set in and trick you into thinking it’s just a small road bump.
1. Tax man’s chasing you
If you’re struggling to pay the Tax Office, then you might need to review your cashflow. Remember this: the GST was never your money, and the same goes with PAYG(W) – you’re merely a collection agency for the Tax Office.
2. Budgeted spend versus actual spend
Business owners should continually be comparing forecasted figures with actual figures. If your actual figures are far exceeding projected figures, then there might be a problem with your spending habits.
3. Customers are disappearing
No customers or customers leaving in droves means you’re doing everything wrong. Stop, re-evaluate and change what needs changing. Can’t figure it out? Get some expert help.
4. Increases in fixed costs
A business can’t carry the increase of costs, these must be passed onto the end consumer. A decline in profitability could be caused by rises in your fixed costs – you need to be on top of these and correct it immediately.
5. Increasing bad debts
Clients don’t pay if they aren’t happy or aren’t having their demands satisfied. So make them happy and get paid, or risk being shut down.
6. Paying by cheque
This is never a good idea. You can’t do business by hoping that when creditors bank your cheque there’ll be money in the account to cover the bill.
7. Poor reporting
You need to be aware of what your business is doing daily. A business needs a reporting system that allows an owner to review what they’ve have achieved daily, weekly or monthly. Your reporting is your Yellow Brick Road.
8. Debtor finance
Relying on external funding, such as an overdraft or credit cards, to get you through the month, is an early sign of cashflow issues.
9. Late payments
Falling into arrears with suppliers isn’t a good idea, as it’s a good indicator things might be going south for your business.
10. Slow moving stock
Keep an eye on your stock levels. You don’t want to run out of stock, but you also don’t want to hold onto too much stock that isn’t selling – getting the balance right can be tricky! If you have dead stock, do something fast as it’s basically cash just sitting there.
Noticed any of these signs in your business? Then now’s the time to act.