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5 Factors that are Bad for your Business Financial Health



As a business owner, one of the more important things you need to safeguard is the financial health of your business. Whether you own a startup or a stable company, constantly assessing how your business is holding up financially is essential in helping you achieve your financial targets. To do that effectively, you should be more well-versed when it comes to the actual factors that could wreak havoc to your business. Here are some things to stay clear of:
 

Excessive inventory

The thrill of putting up a business for the first time or releasing a new product can often be overwhelming, so much so that business owners get lured into overspending on their inventory. Do not fall prey to this. Excessive inventory can add a strain to your business financially, especially if you find difficulty in selling them before it expires or becomes outdated.


Uncollected accounts receivables

 A business should have an effective credit collection system in place to keep accounts receivables updated and settled on time. Otherwise, the delayed or uncollected receivables will likely stunt your business growth. Worse, it could also lead to serious problems in your cashflow, especially if your other sources of income are not that steady to begin with.


Irregular net income

Your net income plays a major role in determining your overall business financial health. By taking a look at your net income, you can set your financial targets and make informed business decisions about expansion or investment activities. While your net income cannot be set in stone due to varied sales activities at different intervals, it is important to note that drastic changes in your net income - specifically, a drastic drop in your net income - is a red flag for your business.


Insufficient working capital

Putting up a business does not come cheap. It goes without saying that you need to have sufficient capital to fund whatever it is that your business needs to operate in full swing. To that end, you need to make sure that your working capital is at a good rate. If not, the chances of your business staying afloat will get quite slim.


Unused fixed assets

Fixed assets - such as added machinery for production - are important for a business. This is an understatement. But if your business fails to make good use of it, it will only become a liability and thus, will become an additional financial burden.
 

Assessing your business financial health is a great way to help you determine how your business is doing and how close you are to hitting your business goals. More than anything else, it also equips you in making better and more informed business decisions.

At FAS, we offer ways to help you up your business financial game. Contact us today and get a free industry report valued at $200. This will give you financial benchmark of how your business is doing against your competitors. 


We help you plan, forecast and analyze your financial data
so you can get on top of your finances today to grow your
small business big tomorrow.

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Address | 810 S. Mason Road, Ste 160, Katy, TX 77450
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