The cash flow tsunami - how to recognise early warning signs
A successful business is one that is well managed. Being adaptable and flexible before major fluctuations occur can greatly assist you in hard times.
Recognising problems before they arise can minimise the fall out and pave the way to a faster recovery. Learning to identify potential cash flow problems is critical to your success as a business as without adequate cash flow it may be on its way to becoming a statistic.
Early signs to watch for include slowing sales and reducing inventory turnover. Simply put, stagnant inventory is a cost to any firm whether it is raw materials or work in progress. So it doesn't really matter if the business is a retailer, manufacturer or service provider.
Watch for any economic signals and take heed when placing inventory orders. Be mindful of the industry that your customers operate in and satisfy yourself that they will be able to honour their obligation to pay you. But a dwindling bank balance is not necessarily the result of market forces.
It can relate to poor decision-making when funding the purchase of a large asset and can even result from under-capitalisation or poor working capital management. Better management can result in cash previously locked up inside the business being made available for investing in opportunities to grow the business.
Watch your key performance indicators and take corrective action to leave your business in a better position. It is important to achieve the outstanding results while your competitors are struggling.
Your key performance indicators and your profitability, solvency and other important financial ratios can serve as useful financial barometers; much like weather forecasts can convey a general idea of what is to be expected.
We have some very useful tools available with which to conduct a quick business health check over your business which will give you either a sense of comfort or the specific areas that you should focus on to improve your business results.
Recognising problems before they arise can minimise the fall out and pave the way to a faster recovery. Learning to identify potential cash flow problems is critical to your success as a business as without adequate cash flow it may be on its way to becoming a statistic.
Early signs to watch for include slowing sales and reducing inventory turnover. Simply put, stagnant inventory is a cost to any firm whether it is raw materials or work in progress. So it doesn't really matter if the business is a retailer, manufacturer or service provider.
Watch for any economic signals and take heed when placing inventory orders. Be mindful of the industry that your customers operate in and satisfy yourself that they will be able to honour their obligation to pay you. But a dwindling bank balance is not necessarily the result of market forces.
It can relate to poor decision-making when funding the purchase of a large asset and can even result from under-capitalisation or poor working capital management. Better management can result in cash previously locked up inside the business being made available for investing in opportunities to grow the business.
Watch your key performance indicators and take corrective action to leave your business in a better position. It is important to achieve the outstanding results while your competitors are struggling.
Your key performance indicators and your profitability, solvency and other important financial ratios can serve as useful financial barometers; much like weather forecasts can convey a general idea of what is to be expected.
We have some very useful tools available with which to conduct a quick business health check over your business which will give you either a sense of comfort or the specific areas that you should focus on to improve your business results.