No matter what kind and size of business you own, each one faces issues every now or then. But, usually; small businesses promptly face many financial hurdles. Whether it’s because of an industry that is seasonal in nature or because of aging accounts receivables. When it comes to financial issues, businesses find themselves facing problems with debt, cash flow, profitability or vendor relationships.
A fact: Every well-managed business has the power to predict the financial storms and to control them on time as they maintain perfectly defined financial books. But there are some businesses that don’t keep track of their financial stability until or unless they get to the point where nothing can be done for the betterment of the business. Thus, we decided to come up with 10 major underlying financial issues that should be kept in mind when you are running a retail business. Following are the financial crises signs that you should know and take action against on an urgent basis.
1. Cash Flow Complications
From time to time, most of the businesses face cash flow problems, distinctly if their accounts receivable is being overloaded with late-paying consumers. If it happens occasionally, it fine. But, if periodic cash crunches are becoming a part of a financial routine, then you should be careful as there may be larger underlying issues.
The cash flow issue can be detected if you can see any receivables issue, or excessive debt, inefficacious use of staff or resources, diminishing sales, lessening profit margin, or even employee theft. Thus, in case, if your business is dealing with a persistent cash flow dilemma, then you should consult a public accountant on an urgent basis to find the best solution.
2. Paying Tax Becomes Stressful
Throughout every single year, businesses are obliged to pay numerous taxes depending on the rules and regulations of the country or city they are located in, as well as where they conducting the business.
Additionally, mostly the retail businesses collect and pay sales taxes on a monthly or quarterly basis. In many cases, businesses stay responsible for withholding and paying payroll taxes for their employees. Businesses that don’t fulfill these obligations can quickly find themselves entangled in additional fees and even some serious criminal investigation. Ones who are conducting business internationally may also be accountable for VAT and other taxes.
So, make it your priority to pay all the taxes timely. Otherwise, your business will be in trouble.
3. Customer Complaints and Delays
If business finances are facing hardship, chances are that its managers might be skimping on the products they sell or services they give. In result, customer satisfaction will evidently reflect this; and the whole act can also result in getting late payment invoices from customers. And in this way, your business will only experience the financial difficulties.
However, frequent negative customer experiences are mirrored in the experiences of the business’ workers; they may also start to lose respect for the business.
4. Asset Deterioration
Almost every business relies on some of the other forms of physical assets in order to provide their products and services to the customers. Whether it’s a retail store with a storefront that requires regular cleaning and maintenance, a manufacturer with equipment, or a contractor with business vehicles, all of these businesses must invest to upkeep these assets on regular basis. And when a business starts cutting corners on production and maintenance of assets, it can directly decrease the customers’ perception of the business, or it can also lead to less efficient production processes. Any of these circumstances can make the financial situation worse.
5. Dreadful Bookkeeping
Perfectly defined bookkeeping is not just a record of previous transactions, but a lot more. Apart from keeping the record of present transactions, it will not greatly affect and make to take better future decisions regarding growth and beneficial spending.
Suppose, if you don’t have a firm grasp on the business’ financial health then it is a serious problem which can lead to plenty of misspending, overdrafts, and other issues. Deficient record keeping can also be used to smartly cover financial improprieties, such as fraud.
In case, if you aren’t in favor of bookkeeping then be aware of the fact that even small amounts of theft can be remained undiscovered, which can cause significant financial stress to a business.
Simply as anyone’s bank account can be thrown into disarray when a number of overdraft charges are applied, this same action can also be taken against any business. Depending on the flow and volume of transactions that are coming in and out from business bank accounts, payments and overdrafts their bank declined can have a rippling effect, which will ultimately cause other payments to be missed, this can also trigger dissatisfaction with vendors.
7. Disappearing Owners
I many cases, when the financial condition of a business gets tough, the owners are hard to find. When a business started facing consistent financial issues, such as complaints from vendors for nonpayment, missed tax payments, increasing penalties for late bills, then overwhelmed or disreputable business owners and managers may not be easy to find. And in this situation, the whole arena of unlikeable events can have disastrous effects on employee morale. It will also lead to continued deterioration of the underlying financial problems.
8. Unpleasant Relations with Vendors or Creditors
Every single business feels a crunch when their customers don’t pay on time, the same happens to the business’ vendors when they don’t get paid on the dot, or payments are returned insufficient. Money issues will always lead businesses to a fractured relationship with their vendors, which will result in higher fees or costs for their services or products or even the severing of the business relationship.
If the business carries on to alienate its creditors and vendors, so it will directly have a negative impact on the business credit scores.
9. Failing to Pay employees
Most of the times, the final “nail in the coffin” of a business is when employers fail to pay employees, or the worst case can be when those payroll checks get bounced. However, if an employee loses all of their trust in an employer, they won’t stay eager to work for the company. And, the gossip of the financial woes of the business will be spread far and wide on social media and in the local community. Remember, failing to pay the payroll taxes of employees is also a theft and when they file their own tax returns, they will need to make up for the non-paid taxes.
10. Facing Legal Action
As a business’ financial troubles intensify through more than one, or probably all, of the above issues, it will be more likely to face legal problems. These range from lenders seeking repossession of property, creditors, and vendors suing for nonpayment, lawsuits relating to nonpayment of employees, or loss of collateral. Deliberate mismanagement of withheld taxes or failure to pay taxes can also result in criminal penalties.
Wrapping it Up!
It is usual for many businesses to occasionally have a financial chumble, but the real challenge is how you deal with it.
Mostly, the responsible business owners know and understand that it isn’t prudent to move money from one side to the other or to hide the problems. Instead, it is necessary to take real and responsible steps to alleviate and deal with the underlying financial issues, whether through increasing prices, finding a way to increase profit margin, or cutting overhead.
If you have an experienced business accountant, he can surely help you find the problems, and develop a plan to overcome them, which will help the business to become sustainable and profitable.