Businesses that fail to recognise the warning signs of poor cash flow are destined for disaster. Recognise these warning signs now and you will be able to weather a short lived storm instead of getting in serious financial trouble.
- You’re Always Chasing Late Payments
Investigate better ways to collect outstanding invoices when it starts becoming a daily struggle. Your cash flow is already being tightened by chasing payments that should have arrived weeks before so why lose control further? This perpetuates a dangerous cycle where you are always waiting for money before paying your bills.
- Paying Bills Later Than Usual
Are you delaying supplier payments up until the eleventh hour? If you find yourself robbing Peter to pay Paul (or rather deciding who is less likely to cut your service off first so that bill gets paid) then it’s a sign of cash flow in trouble. This juggling act very seldom ends in a good way and can serve to seriously damage relationships for future business.
- Relying Heavily on Credit
One of the biggest red flags is when your company credit card goes from something you bust out to make an occasional purchase into using it for daily operations. If instead, you’re constantly accessing overdrafts and thinking about obtaining other loans just to keep the lights on, your cash flow situation is urgent. For advice from Accountants Bristol, visit //chippendaleandclark.com/accountants-near-me/bristol/
- Declining Profit Margins
If you are lowering your prices to win business or not able to increase them along with the rising costs, this is affecting profit margins. That might bump up sales in the short term, but it has dire cash flow consequences long-term as you work harder to receive less pay.
- Inventory Issues
Having either too much stock that is sucking up your capital or not enough, causing missed sales equals a cash flow problem. Too much inventory equals funds lying dormant on shelves instead of cash within your bank account, or too little stock indicating that you cannot afford to buy enough supplies.
- Your Failures to Leverage Opportunities
If you find yourself passing up on opportunities that would be beneficial to you in the long term — such as bulk purchase discounts, new equipment or expansion prospects simply because cash is wrapped up elsewhere, it’s a clear signal there are some serious issues with your payment cycles.
- Sleepless Nights Over Money
That is perhaps the clearest indication of all, especially when money problems have kept you up at night. Ignoring feelings of desperation at the need to make payroll, meet rent or cover basic business costs.