A new client came to me the other day concerned that while the business results for their most recent year end were the best yet, cash flow problems precluded them from being able to pay the Federal and State balances due by the due dates. This was a sign that all was not well with the health of the operation.
Most major business problems today fall into one of these four categories…
- Cash management.
- Pricing strategy.
- Cost control.
- Internal control systems.
Warning signs that one or more of these areas needs help include…
- An inability to pay trade creditors what is due, when it is due.
- An inability to meet the demands of taxing authorities, including failure to make tax deposits on time, if at all.
- An inability to cover lender demands in terms of due dates and amounts.
- An inability to secure traditional financing from a reputable commercial lender.
- A loss of customers.
- A loss of key employees.
- Poor operating results including weak gross and net profit margins.
- Weak or non existent financial information.
Any one of the above can be disruptive and threaten the viability and the future of any operation especially in a market like the one that exists today where there is absolutely no room for error.
As the old adage goes “diagnosis is half the cure” but, I would add, the diagnosis needs to be timely.
While business, even amongst the best operators, will always be a challenge, paradise can be regained but it will require immediate intervention and discipline.
This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.
