Managing a small business is everything but always easy. If you are a small business owner, then you realize that you have to work hard to ensure that your business can succeed. One great way to achieve success is by actively monitoring the following warning flags, indicating that your business might be in trouble:
Reduced Cash Reserves: If you do not have enough money to pay expenses, you and your business will quickly suffer the consequences. Prepare accurate financial claims (i. e. Income Statement, Stability Sheet, and Cash Flow Statement) monthly and review them frequently in order to anticipate any problems. The best way to preserve cash reserves at an appropriate level is to continuously monitor income and expenses. If you don’t have time to properly handle your income, consider hiring an accountant or purchasing software such as Quickbooks.
Declining Sales: Monitor closely any kind of decline in your sales and ask your self: Why has there been a decline? Internal or external elements such as the ones listed below might be inside your business.
Internal: Decrease in quality of product, poor service, limited marketing/advertising, personal issues, limited resources to fill orders, or small personnel.
External: Weather, increased competition on the market, alternative products available, or a general decline in the economy.
Too Much Borrowing: Funding money to make payments of some other loans or to pay off debts is almost always a red flag.
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Analyze the situation and try to find ways to reduce your reliance on borrowed funds to pay down your debts. Borrowed money should be used to spend money on your business in such a way that will yield payouts down the road. Research should be conducted to verify that the funds from the mortgage 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 money flow of your business. Try to find ways to reduce your expenses and to increase your revenue, as the cost of late payments can also add up quickly. If you are making regular payments but always a few days past due, try cutting back in other areas to create your account current and then continue producing those regular payments.