Time For A Checkup

How to determine if your business is financially healthy
2 min read
Opinions expressed by Entrepreneur contributors are their own.

Business Start-Ups magazine, August 1998

Your sales may be up, but that doesn't necessarily mean profits are. Check out a few other indicators to determine if your business is financially healthy. The following symptoms could indicate problems:

  • High expenses. You've moved into impressive offices, bought a luxury car or in other ways are emulating established big business. Or, equally problematic, your payables are growing faster than your receivables.
  • Low expenses. You're not reinvesting in your business. You're ignoring the need for newer equipment, marketing programs or professional services.
  • Mounting inventory. You're buying or making more goods than you're selling.
  • Limited clientele. One or two customers account for the bulk of your business.
  • Excess liabilities. The sum total of all your debts payable in the next year is greater than what you own plus what is due you (receivables).
  • Escalating receivables. If your receivables are climbing monthly due to growth in sales, great. If they're rising as a result of slow-paying or delinquent customers, not so great.
  • Tax deficiency. You haven't set aside funds to pay estimated quarterly taxes.
  • Static pricing. You haven't raised prices to market levels or to allow for rising costs--or, worse yet, you've lowered prices to maintain sales volume.
  • Lack of systems. You operate without a business plan, budget or bookkeeping system.

One or two of the above need not arouse concern, but multiple symptoms may mean you need to revamp operations. Consider contacting a business consultant, accounting firm or the SBA.

Paul DeCeglie is a former staff reporter for Journal of Commerce and American Banker. He can be reached at MrWritePDC@aol.com

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