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

More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Amplify your business knowledge and reach your full entrepreneurial potential with Entrepreneur Insider’s exclusive benefits. For just $5 per month, get access to premium content, webinars, an ad-free experience, and more! Plus, enjoy a FREE 1-year Entrepreneur magazine subscription.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur