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Five warning signs your business is in trouble

Be proactive to manage your business through difficult times

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  • Look out or these five warning signs – your business could be in trouble
  • Tips on how to get your business back on track

1. Inability to pay your debts

If your debts are mounting debts and you're juggling your cash – it's time to look at ways to improve your cash flow and get back on track..

Think about ways you could increase cash flow, such as:   

2. Poor profitability

If your profit is reducing – your business could be on a slow downward spiral.

Start to monitor profit, identify issues regularly and consider areas such as:

  • gross and net margins – check your stock prices and on costs and review expenses regularly to ensure that you are passing on any increases to your customers if possible
  • sales – do you have measures in place to retain and attract new customers, and are they working?
  • if you're offering discounts, your profit will be impacted – look for alternative ways to offer extras to your customers, such as after sales service or discounts for volume based sales
  • review the productivity of your staff and your rosters – make sure all of your staff are fully employed during their rosters.

3. No access to finance

If you don't have access to finance when you need it – this could be the start of the end of your business. 

Having a finance facility in place that's available when finances get tight is a good contingency plan, so think about:

  • obtaining a finance facility when the business is showing good profit and cash flow
  • developing a good relationship with your bank and keep them informed on how the business is going – so that if you need to approach them for finance they'll l be well informed on your business operations which may assist in obtaining finance
  • extending supplier terms – these are effectively an interest free loan
  • monitoring cash flow through forecasts so you can identify possible cash flow shortages before they happen – and take action to rectify this before it happens.

4. Continually replacing staff

If you have a high staff turnover – you could be wasting valuable resources having to spend time and money on training new staff.

Think about ways to reduce staff turnover, such as:

  • having a recruitment plan in place that outlines the attributes your staff need to meet, such as any qualifications, flexible to working hours, being a team player – invest some of your extra time at this point to ensure you employ the right staff for your business
  • being an employer of choice – provide great support and training to your staff and the word will get around
  • involving staff in managing the business – you'll get more commitment when your staff have a say
  • making sure the culture within your business provides the types of rewards your staff are looking for.

5. Inadequate financial records

Financial records are the backbone to your business.

It's critical to keep your records up-to-date and monitor them regularly – make sure all your invoices and payments are entered weekly into your financial system. 

Review your profit and loss statement monthly.

cash flow forecast monitors the cash position of your business, and this should be prepared at least monthly – doing weekly forecasts will show you what payments need to be made, and where the money is coming from.

Get your business back on track  

Follow these suggestions to help make running the financial side of your business easier, and get your business back on track: 

  1. Make sure you have a good filing system in place that makes it easy to find invoices, bank statements and all the information you need to keep your financial records up-to- date.
  2. Set aside time each week to update the financial records and review them – perhaps on the quiet trading day so you won't become distracted.
  3. If you haven't already, find a good bookkeeper or accountant, and ask them what key financial areas should be reviewed regularly.
  4. Update your financial management training – there are a number of seminars and workshops you can attend to help you better understand your figures.