3 more warning signs of a business downturn

Is a business downturn on the way? Spot these signs and then take action immediately.

Ups and downs are part of business life. A short-term slump doesn’t always signify an impending disaster. Even so, if a slump lasts for several months, there could be a larger challenge on the horizon. 

We’ve already seen five warning signs that your business could be failing, so now let’s look at three more warning signs of a business downturn:

1. Inventory is rising

An increase in the value of your inventory could mean that you’re purchasing more than you’re selling. It could also mean that the cost of your inventory is rising. Whatever the reasons behind an increase in inventory, it is not usually good news. Excessive inventory could be a sign of a deeper problem with the business, and it ties up cash.

2. You’re constantly fighting fires

If a business is about to enter a free fall, the CEO or business owner will often be called upon to fight fires. Spending more time on the day-to-day management of the business may be a sign that the staff can’t cope. Your employees are leaving it up to you make decisions such as who should get paid and who should not. This is not because your employees are unable to make the decisions. Your team is not making decisions because they realize that these decisions are now crucial to the future of the business.

3. You’re paying yourself less money

If you have stopped paying yourself to save some cash, that’s an obvious sign that something is not right. Reducing how much money you take out of the business may provide a temporary fix, but it’s not a long-term solution. If the business can no longer afford to pay you, it’s time to make some changes.

 

There’s strength in knowing the signs of a business downturn.

The sooner you spot the signs that your business may be failing, the sooner you can act to remedy the situation. That’s why it is so important that business owners and CEOs never take their fingers off the pulse of their business. Reviewing trends and key performance indicators (KPIs) can seem like a chore, especially if the business appears to be healthy. But tracking financial KPIs will help you spot the underlying signs that something is going wrong and give you the time to fix it.

For best practices in managing cash flow to keep your business healthy, access the Cash Cycle Guide or click the image below to get your own downloadable copy.