Business Survival During Tough Economic Times
Updated: Aug 26, 2022
Just as people need to watch their blood pressure, weight, and cholesterol, which are vital health indicators, business owners also need to monitor crucial financial information to enable them to manage their businesses successfully. Failure to stay on track of your business's financial health could gradually result in business failure; however, failure rarely occurs without warning.
What to Watch Out For
By regularly utilizing reporting tools such as profit and loss statements, balance sheets, customer databases, etc., watch out for these evident signs:
Sustained Cash Flow Problems
Cash flow management is an essential strategy to running a successful business, as having a poor cash flow is the reason most small businesses fail. Moreover, you must keep personal transactions entirely out of your business. Comingling personal transactions with business could contribute to cash flow problems and inflate your expenses, which could be a red flag to the IRS.
An Increase in Expenses
An increase in expenses can sometimes indicate a deficiency of spending controls; therefore, you should compare expenses against prior months and also the same period last year. This will help you pinpoint where your expenses have increased.
Too Much Business Tied to a Single Customer
Diversity is significant for any business, especially in tough economic times. Be sure to expand your business enough so that no more than a third of your business comes from one customer.
Steps to Healthy Business Finances
Here are some simple ways to keep your companies finances in good health:
Regularly monitor your finances and make strategical adjustments based on your financial analysis. Stay on top of your numbers to allow yourself to recognize problems while they are still small.
Control your business spending to conserve cash. Review your expenses regularly and see what costs you can cut down on without allowing the business to suffer. Do not overstaff your company or overstock inventory. Seek to outsource work to independent contractors if possible, rather than staff additional employees.
Stay on top of your receivables and be firm about bill collecting. Possibly start asking clients for advance payments or offer a small discount to early payers.
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