Running your business at a loss is normal if you’re starting out or growing fast. But if your business continues to lose money, it’s important to take steps to improve your finances. Here are warning signs to look out for and tips for getting back in the black.
Unpaid debts impact your cash flow. It’s is one of the biggest risks your business can face. If you have little or no money coming in, you can’t pay your suppliers without going into debt or using up cash reserves.
Sometimes business can be booming and you still have no money in the bank. The answer is to focus on getting paid in full and on time.
One way to reduce the risk is to have a cash flow forecast for all your income and outgoings. You’ll see shortages coming and can plan to lessen the financial blow.
This is quite normal for start-ups, but could be a warning sign for more established businesses.
The flip side of not getting paid on time is you don’t have enough in the bank to pay your own bills. It’s another sign you need an accurate and up-to-date cash flow forecast.
If you don’t pay your suppliers on time and in full they may stop supplying you — a huge risk to your business. Here are some tips on how to do it:
The longer your income falls below your costs, the harder it’ll be to get into profit.
If your business slows down at the same time each year, factor this seasonal downturn into your cash flow forecast. Spotting a general dip in the economy or your sector is harder to do.
An accountant can help you improve your financial forecasting.
How much of what you make or sell do you need to sell to meet your costs — and how much to make a profit?
If you don’t know, it’s hard to tell when you might run out of money. Talk to an advisor or your accountant. Ask about simple ways to keep track of money owed by you and to you. It’s also a good idea to get help to review your prices. Do these cover all costs?
Cash flow forecasts also calculate your outgoings, so you know when you’ll have the money to pay your bills. Get your accountant to help you understand your long-term cash flow.
Other signs to look out for in your day-to-day business:
If any of these apply to you, talk to an advisor who specialises in turning businesses around.