Every business has its ups and downs, with periods that are blooming and other times when it can be a struggle to make ends meet.
But if the bad times start to outnumber the good, lasting far longer and plunging to new depths, it might be a sign that your business needs some help.
It’s not always easy to see how bad things are, particularly if you are battling to deal with the issues on a daily basis. Below are a few signs which taken together should always be seen as red flags and a trigger for further action.
You Start Avoiding Phone Calls
A good business thrives on building relationships with customers, debtors and creditors and that means being available for communication.
If you start avoiding picking up the phone for fear of who’s at the other end, it’s time to take stock of what’s going on.
You might check who is calling before picking the phone up
When debts start to mount, it’s common to avoid the telephone to escape the barrage of calls from creditors chasing their cash, particularly when there’s no plan in place to be able to pay them.
Being Unaware of How much you Owe
Few business owners relish the task of staying on top of their paperwork but having a realistic understanding of what’s coming in and going out is essential.
There’s lots of different ways to monitor cash flow and expenditure, but whatever method you choose it’s vital that it’s kept up to date and easy to understand.
In businesses that are going under, the owner frequently doesn’t really know the full extent of what they owe, or in some cases the amount of money which is due to be paid to them either. It may not make pleasant reading but understanding the true financial outlook is crucial to being able to make a rescue plan.
You’re Waiting for the ‘Big One’
Everyone hopes to land a big client or a contract, and most businesses continuously strive for this goal.
But whilst that is an understandable target, desperately clinging to the hope that against the odds you will land a large and lucrative deal which will solve all your financial problems is a big red flag.
The chances are that this type of contract may not arise, and if this is your only plan for salvation, what happens if this doesn’t materialise? Every business needs to have contingency plans, and to base their assumptions on what’s realistic rather than just a pipe dream.
You don’t have the Cash Flow to Buy New Products or Stock
Cash flow problems don’t happen overnight but creditors are normally pretty good at sniffing out the signs that a business is in trouble.
When this happens they may call in their debts, or refuse to extend any more credit until payment has been made. If this happens it may mean that there’s not enough stock coming in to generate sales, hampering the business’s ability further to get out of a bad situation.
Business cash flow is critical
You may find yourself trying to seek out new suppliers hoping to get fresh credit or borrowing from other areas in order to try to find the money to pay the creditors.
All of these are signs that your business is in real trouble and if you don’t address it now, you won’t have one for much longer.
Although all of the above red flags can be the start of a death knell for a business, if you take swift action it doesn’t need to be the end. If you carry on doing what you have ever done, you will get what you have ever got so it’s time to make a change. If you’ve left it too long and the problems are severe, administration doesn’t have to be a negative step, and can be the wholesale change you need to wipe out the problems and start anew. Don’t be afraid to take action, because left unchanged, the business will only end up moving in the direction you have been trying to avoid all along: liquidation.