Company Finances: Signs They’re Going South

Javi Fondevila

Whilst launching a start-up business is now easier than it has ever been thanks to the internet and technological advancements, it’s still not something that is easy to do. Launching a business is hard enough but keeping on top of your obligations such as financial accounting, customer relationship management, and promoting growth is much harder.

It is easy for you as a start-up entrepreneur to be blinded by your own perceived success. Although you may think everything is going swimmingly, this may not necessarily be the case. If you’re not careful, you can go under in the blink of an eye due to a variety of reasons. One of the leading causes of start-up failure is financial troubles.

Sussing out whether your company finances are taking a tumble can be hard to suss out, especially since that most of the signs aren’t related to how much money you have in the bank.

5 Signs Your Company May Be Going Under

Although this is not an exhaustive list and the signs that a company is failing depends on each individual one, these are some of the more common signs.

1. No money to do anything

This is the first sign that you are headed for serious financial trouble. If you find that you have very little spare capital to do anything with after all your obligations are paid out, then you’ve got bad cash flow. In the past it may have been easy to secure capital to get things done with, however, for some reason, it’s now started to dry up.

2. The fun has disappeared

Running your own start-up should have plenty of fun elements to it. Sure, it can’t be all fun and games 100 percent of the time, but if you are finding yourself stressed all the time and unable to have fun with your work anymore then this could be a sign of a more sinister underlying problem. When the fun has dissipated, it may be signs of trouble ahead.

3. Your bills are regularly paid late

Paying invoices isn’t fun, but they should always be on time. Short-term late paying of bills, debts and invoices is probably due to poor cash flow and if this doesn’t improve in the long-term then it’s a clear sign that there’s something amiss with your company’s finances. Look over your budget and see if there is anything you can do to cut costs and alleviate pressure.

4. Your profits are dwindling

Profits aren’t consistent and can rise and fall as the crow flies, but if you are constantly struggling to make profits and this number is shrinking then this can squeeze your company’s cash flow. It’s normal for profits to fluctuate but if they are consistently decreasing to the point where you are barely breaking even or fall under that point, you will need to act fast to sort things out before your company gives way.

5. You are borrowing more

Borrowing is normal for companies, particularly start-ups, however, what matters is the reasons you are borrowing. Sourcing investment funds for growth? Taking out a bank loan to finance an office expansion? These are fine. Borrowing money to pay your invoices and bills? Seeking financial relief so that you can pay your employees on time? These are not fine. You start to wander into dangerous territory when borrowing money to temporary resolve cash flow problems. Remember, it all needs to be paid back.

Your Financial Accounting Could Be the Problem

One problem we see time and time again with start-ups is a lack of good financial accounting. Financial accounting is by far one of the most important things a start-up entrepreneur can keep on top of. Despite this, so many people fail to appreciate just how important it is and how useful it can be. In relation to what we have just discussed, financial accounting can help you see problems long before they arise and manifest into serious issues that could spell financial disaster for your company.

It is always recommended that you are using robust and trusted financial accounting software to keep on top of your numbers and day-to-day financial obligations. Coupling this with a professional accountant is never a bad idea, either.

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