3 Signs Your Business is Facing a Cash Flow Crisis
Your company’s cash flow is responsible for maintaining your business’s different functions, from providing for your employee payroll to your operations management fees. This is why you need to pay attention to how well you can keep your cash flow with a positive net worth.
Avoiding the signs of a cash flow crisis
Cash flow generally goes in one of three ways: positive, negative and breakeven. Although it’s safe to have a breakeven net worth, it should be a sign that your company isn’t generating the income it needs to operate independently. Having your cash flow in the negative can cause you to make drastic business moves such as laying off employees, reducing company operations and even declaring bankruptcy. This is why you should know how to solve your cash flow issues before they get any worse.
If you want to avoid your business’s cash flow crisis, here are three signs that you should watch out for:
1. Low sales figures
Beyond all the community building and branding efforts, remember that your primary purpose as a business owner is to drive sales. This means that you should optimise the highest possible output when entertaining leads. If you don’t reach your target sales margins, you need to create strategies to reinvigorate customer interest.
Research on ways you can use to incentivise customers, from offering discounts to creating referral rewards systems. The best way to improve your sales figures is to maintain a modular and adaptable sales funnel. This will allow your sales reps and marketing managers to make improvements to sell your products. It’s even better if you can introduce automation and digital tools that streamline your process to have as few errors as possible.
2. Inaccurate and mistimed product pricing changes
One of the many factors that affect slow sales figures is improper pricing. Businesses usually reduce prices or introduce discounts to attract potential customers and to engage with their current followers. However, doing it at the wrong time can do more harm than good to your company.
Assessing your current projects and pricing will help you find the best value that will lead you with a positive net worth. This is something you need to do, especially if you’re testing the waters with a new target demographic. Analyse what factors affect your overall profit margin, whether it’s through your shipping costs or your product storage maintenance. Remember to adjust your prices at the right time with an effective marketing plan to make the most out of your repricing strategy.
3. Build-up of debt
Incurring debt is natural for small business owners that need a business loan to help start their entrepreneurship. However, borrowing money consistently is a red flag for any company. You could have outflows in your financials, which can quickly turn into considerable debts if your operations aren’t delivering your projected ROI.
These outflows of financials can come from various sources, from your manufacturing supplier to your commercial space landlord. If you start noticing that you’re incurring too much debt, you should seriously reconsider your current business model. You may need to refinance your business’s different departments if you want to avoid going in a cycle of borrowing money to pay for debts.
It’s your primary goal as a business owner to avoid these pitfalls and remedy them with the right strategies. An excellent way to prevent them from happening is to have accurate bookkeeping of your business’s financials. This will allow you to preempt any drops in your cash flow and perform the necessary adjustments to bring your company back in a favourable position.
If you have trouble with your bookkeeping, you should hire the best accountants in Gold Coast at New Wave Accounting to handle your company’s financials. Our team of professional accountants can keep your business’s records in check to avoid any issues with your cash flow. Get in touch with us today!