Best Business Practices

Businesses that end up on the critical list usually show signs that they are ailing long before they need intensive care. By recognizing these signs and making a concerted effort to tackle the underlying problems early on, owners can often turn their troubled businesses around and return them to good health.

Warning Signs

Signs of distress may include:

• Several quarters of declining sales and lower profit margins
• Persistent cash flow problems
• Inability to meet a lender’s requirements for a working capital line of credit
• Declining productivity
• Poor employee morale
• The loss or failure of one or more significant customers

Don’t Wait

Business owners sometimes make the mistake of waiting too long to act on bad news. While a bad quarter or two often can be explained away, a persistent problem shouldn’t be ignored. A business that has previously been on a growth track has all the more reason to investigate the reasons for a downturn promptly.

Get on Firmer Ground

Once a continuing problem is recognized, steps should be taken as soon as possible to curb the downward spiral and stabilize the business. It may be important to update bankers and suppliers regarding the situation and let them know that efforts are being made to turn it around. Open communication can help show that management is serious about reviving the business and can make it easier to enlist help from these groups later on.

Analyze Operations

Decisions can’t be made in the dark. Despite the daily pressures that may only intensify during hard times, it’s important to keep financial records and disseminate key information to management for analysis. Expenses should be looked at in detail to determine which can be reduced or eliminated to improve cash flow.

Declining sales can reflect a slow economy, but a downward trend also may indicate that the business is losing market share. This is not the time to let customer service and quality standards falter. Nor is it a time to ignore the competition. A business that is repeatedly losing sales to competitors has to ask whether it is still in touch with — or has lost sight of — the market’s demands.

Take Action

Once all the groundwork has been laid, it’s time to put the plan into action and start making the necessary changes. This is the point when the owner’s leadership skills are put to the test. It is the time when he or she has to inspire and energize managers and employees to make a sustained, disciplined effort to revive the business and retain the support of suppliers, bankers, and customers.

Matthew J. Rice CPA provides a variety of accounting, tax, and financial services to Charlotte business owners. Call Matt Rice at 704-609-1119 and ask for a free initial consultation today to find our how we can work together for your success.

How can your company attract and retain top employees? It’s not always easy, especially for small businesses. Having a streamlined hiring process and ensuring that your salaries and benefits package are comparable to other, similar companies in your area can help make your company an attractive destination for high performers. Here are some pointers to jump-start your thinking.

Simplify the process. Make sure job responsibilities are clearly described when posting your openings. Candidates should be able to easily ascertain if they have the appropriate qualifications for a position. Also, describe any documentation candidates may need to submit with their applications.

Be open and professional. Let candidates know early in the process, preferably in the job posting or during interviews, how much the position pays. Top candidates appreciate candor about such matters. Treat candidates professionally during every stage of the process — it sends a strong signal about your company’s culture.

Evaluate your benefits package. Compensation and benefits are important factors when it comes to attracting and retaining top talent. Salaries should be in line with what other companies in your region pay for specific occupations. Attitudes toward health and retirement benefits can influence employment choices and how committed and engaged employees are after they are hired. Your company will have a leg up on attracting and retaining the employees it needs to succeed and gain a competitive advantage if it can offer the benefit options top performers want.

If you are unsure whether your current benefits package is competitive, please contact your financial professional. An analysis of your current retirement and insurance benefits will help you identify areas that may need to be improved if you are to attract and retain the best employees.

If you’re ready to fulfill your dream of starting a new business, call us at 704-609-1119 or request a free consultation online now to get started. We work with new business owners in a wide variety of industries.

Before you get involved with other things this summer, schedule a mid-year checkup. No, we’re not talking about the height/weight/blood pressure kind of checkup, we’re talking about the income statement/balance sheet/cash flow kind of checkup — a review of your business’s financial operating fundamentals.

If you review your vital financial information only when year-end rolls around, you may not know there’s a problem until it’s too late. The more often you take your company’s “pulse,” the sooner you’ll be able to notice — and react to — changes in your business situation.

Check Your Vital Signs

What should you be looking at? Start with the operating fundamentals. For example, what’s the status of accounts payable? When’s the last time you ran an aging report for accounts receivable? How quickly is your inventory turning? What is your profit margin?

These numbers are critical to running your business. You can’t make accurate decisions if your figures are old. And, by keeping track of key financial ratios, you can more readily spot trends that should be addressed sooner rather than later.

Monitor Your Budget

Next, check your spending. If overspending is a problem, creating a comprehensive budget that establishes realistic guidelines is an effective remedy. Make sure you have a budgeted amount for every line item expense on your operating statement. Then track and compare actual spending to budgeted amounts on a regular basis.

Reduce Your Debt

Avoid the temptation to take out all your profits in good years. Instead, consider reinvesting some of those earnings in the business. Using retained earnings instead of debt to capitalize your business saves money — and provides a safety net that will be there to help you through periods of lackluster sales or unexpected expenses. A healthy debt-to-equity ratio will also look great when it’s time to borrow money or sell your business.

See a Specialist

Helping owners build and maintain healthy businesses is our specialty. Let’s schedule that mid-year review of your company’s finances soon.

To learn more about financial reviews give us a call today. Our trained staff of professionals are always available to answer any questions you may have. Contact us today for a free initial consultation.