There is such a thing as healthy paranoia in business. It is as much an instinct as a trained response to a situation which does not feel right. Experienced businesspeople turn this into a reflex action when assessing doing new business and it’s a real asset.brideswhisper Nowhere, however, is it more of an asset when you’re getting that feeling about your business’s health. There are a range of options for getting out of trouble before you get in too deep, including voluntary administration and other possibilities for shutting down problems before they turn in to catastrophes.
Telltale signs of trouble
The signs are readable, if you know how:
- Slow payment of accounts– This is one of the most notorious of all problems for any business, and it can put a serious strain on cashflow.
- Extra costs– These unexpected and unwelcome costs tend to show up along with other issues that are costing money. They’re a potentially serious issue, if they represent significant costs relevant to revenue.
- Credit issues– Credit can blow out. It needs to be kept under close scrutiny, because this is a cost which can also blow up into a serious viability issue for the business.
- Business debts– These things tend to accrue over time. They’re sneaky, and they can add up to nasty amounts of money.
- Debtors– When the slow payments turn into non-payments, you’ve actually got two problems- Credibility and cash. You can’t do business as a charity. You need the cash.
- Operational costs– These things are unavoidable, and the money for them has to be scheduled into a workable methodology relative to revenue. The costs may include maintenance, new equipment, new software, or staff.
If you’re getting the impression that these things in combination add up to major problems, you’re right. Keeping an eye on costs is a basic business issue, and it’s rarely easy, particularly for new businesses which don’t have the cash to be sure they can manage extra costs. The need at this stage is for financial projections, and pinning down facts.
Financial projections- Finding problems before they find you
Financial projections don’t have to be 100% accurate, but they do have to accurately disclose incoming issues for the business. You can do a rough financial projection in your head.
For example:
- Projected revenue is $5000 over a given period of time
- Operating costs- $2500
- Credit- $500
- Electricity- $150
- Phone $200
- Rent- $1000
- Stock $1000
You’re $350 in the red at this point based on your revenue. That’s 7% of your gross monthly income. In 12 months, it’ll be $4200 on base revenue of $60,000. It also represents over 4 months’ worth of stock purchases. That’s also assuming no other costs occur, which is unlikely. Do you have a problem? Yes you do. You’re operating at a loss with no safety net against extra costs. One unpaid account could be big trouble. You’ve also got taxes to consider.
This is where you need to get some professional help. One option is receivership, a process that puts an expert in charge of managing your business. A receiver is appointed to turn around business, and they usually do.
The trick is to get help before you need help. If you’re getting worried, now is the time to start looking for solutions. prom dresses online shop
Talk to your accountant about options.