How long has your business been in trouble?

Posted: June 9, 2013 in Up-and-running Business
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No this isn’t a rhetorical question! Financial statements provide “ex post” information that could be warning signs:

  • Cash position
  • Trade vendor payables
  • Receivables
  • Inventory
  • CRA remittances

The fact that your business is in trouble didn’t happen overnight. Accounting software packages have an easily accessible report that compares the current (YTD) income statement to the same period last year. So what were the key variances? What has happened to revenue? Have customers left? Do you have a reliance on 2 or 3 major customers? What does their revenue variance show?

If revenue is flat or declining, what about overheads? Have they stayed flat or have you wisely decided to “rationalize” some costs?

The impact of revenue declines will show up on the income statement but, more importantly, revenue declines will morph into cash declines. If cash disbursements stay the same and cash receipts are declining, do you know what your cash position will look like in 60 days?

What is your action plan? Sitting on your hands and hoping for better days ahead is not a plan.

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