How to Spot a Business Problem Before it’s Too Late

Many business problems are spotted only months after they first start to seriously affect a company’s prospects in the marketplace. By this time, any solution is generally expensive, and requires significant investment of time and effort by the business’ owners. Truly wise entrepreneurs invest a small fraction of that time into spotting issues before they become problematic.

Common Business Problems

Every business problem comes back to a lack of sustainable profit. Anything which impairs your company’s ability to continue to generate profits over the long-term is a serious issue. Such a lack of profits, however, can be caused in many ways. Even a seemingly successful business can be storing up future issues for itself if you do not keep a careful eye on the overall strategic situation. For example, a drop in profit can be caused not just by less customers purchasing your product, but, counter-intuitively, by more customers wanting to buy. This can lead to you investing in growth at a rate which your business model cannot sustain, which in turn can lead to serious cashflow issues and an inability to pay suppliers or invest in necessary equipment.

Predicting Potential Problems

Fortunately, a few simple techniques will enable you to accurately predict many of the potential problems which may impact your business. The first is the cashflow forecast, which enables you to predict the effect that your decisions will have on your profitability in the future. You should be performing an update to your forecasts every month, which should be rooted in the real data you are receiving from your accounts. If your cash reserves look as if they will begin to run low, take action immediately rather than waiting for ‘something to turn up’. Many more options for dealing with the situation will be open to you whilst you are solvent than when you are struggling to pay the bills!

You should use your regularly updated financial forecasts to plan ahead in terms of cash investment. If you need to purchase key pieces of infrastructure in order to move the business forward, or desperately need to take on new staff to expand, make sure that you understand the full ramifications of doing this before you proceed. If you foresee cashflow problems as a result, either delay or investigate some form of financing option to better preserve your day to day operations. Also, don’t forget that you do not have a monopoly of knowledge on your business. Draw on the subjective experiences of your employees, and understand the experience of your customers by organising regular ‘mystery shops’. Ask a friend or colleague from outside the company to purchase a product from you, and to identify the ups and downs of your existing business model. The key to spotting problems is to utilise knowledge from wherever you can find it, and to act quickly once you know what is going wrong. If you commit yourself to a better understanding of your business, you are much more likely to succeed.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

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