Warning signs are useless if you don’t notice them. You must have easy access to your business metrics and review data regularly.  

Sloppy financial, office management systems and data collection systems are a warning in themselves that you are not in control.  

Some other red flags are: 

High staff turnover

If staff are unhappy, customers won’t be too far behind. High turnover indicates you have a culture problem. Unhappy staff are unproductive and do not care about your business. When they leave, it is expensive to hire and re-train.

You rely on debt finance to make ends meet

If your business regularly needs to use credit cards or overdrafts to cover expenses, such as loan repayments, leases, wages, or inventory, you are not generating enough income and it will come to a head unless you get to the bottom of your cash shortage. Forgoing a wage or taking one below market standards is not good business practice.

Sales decline/no new customers

If your sales have been in decline for more than three months and it is not industry-related, you have an issue. Similarly, if you have noticed a decline in new customers, web traffic or phone calls (your website metrics and call tracking can be invaluable). Be alert for any potential industry disruptors.

A full stockroom

Efficient stock management is crucial. Best practice is to negotiate payment terms with suppliers which allow you to minimise the time between when you pay them and when customers pay you. Inventory that sits in stock rooms is costing you money and bogging down your cash flow.

Poor profitability

This is a serious problem. Low profitability is a downward spiral, and something that should be addressed quickly, with expert guidance. Don’t bank on increasing sales to keep you afloat. You may need to restructure and review your pricing. Examine staff productivity and the efficiency of your processes.