There are many reasons why businesses fail, and all of them are due to the company owners’ inability to spot where things are going wrong in their business. If you are an entrepreneur who wants to avoid having to shut your company down, you may as well take a careful look at your financial statements because they actually show some warning signs that something is not right about the way you’re handling your business. Taking these red flags for granted can leave you surprised that all your investments and hard work should go nowhere.

Here’s what to beware of:

1. You’re too focused on one market base. As a businessman, you get satisfaction from the fact that you have continuous flow of income. You have to be sure, however, that you don’t have just a single source of revenue. Take a look at your list of customers and see if there’s something you can do to increase revenue. In many cases, successful businesses tend to relax in marketing their products or services. Keep in mind that the more customers you could reach out to, the better the future of your business will be.

2. Your outstanding balance never seems to go down. More often than not, businessmen get their funding from lending institutions. Thus, it is their job to make sure they pay off their loans while at the same time making their businesses self-sufficient. If you see that you are still somewhere near your credit limit, there is something wrong with how you are managing your finances. This could also be a sign that you are actually not earning enough cash to keep things going for your business.

3. Your accounts receivables are too high. Your customers are your main source of income, of course. Therefore, if they are not able to give you the money they owe you, your business is in big trouble. After checking your current accounts receivable, get in touch with your clients and inquire about if or when they could pay you. It is also recommended that you work with a credit collection agency to ensure your cash flow increases and becomes steady.

4. Your administrative expenses are consistently on the rise. Spending for the maintenance of your business is inevitable, as you may know. However, there is no point in letting these expenses go up, especially if your business is experiencing some kind of slow-down. If you realize that your administrative or overhead expenses for the past three years are going up, perhaps it is time for you to think of other strategies, methods, and even policies that will lower your expenses. Consult a business mentoring expert if you are not sure what steps to take to get these things done.

Author's Bio: 

Cecile Peterkin is a certified career and retirement coach, and a registered member of the Career Professionals of Canada and the International Coach Federation. She is also the Founder and Senior Career Strategist at Cosmic Coaching Centre, provider of career and life management services for middle managers and mid-career professionals across Canada, United States and Europe.