SBDC Staff Report

The local Small Business Development Center meets with business clients who are looking to restructure their existing debt or are looking for financing to make improvements, expand, finance inventory or are in need of working capital. One of the major obstacles that SBDC and its clients face is a lack of current financial statements. The following checklist represents a clear set of danger signals — situations and issues — that have a clear and negative effect on cash flow.

• No review of financial statements on a regular basis.

• Balance sheet only prepared at the end of the year, and only used for tax purposes.

• No physical inventory taken on a regular basis.

• No monthly cash budget projection.

• Increasing labor costs without an increase in income.

• Bank credit line not paid down to zero within the last year.

• Buying at trade shows without a purchasing plan.

• Short-term credit lines used to purchase long term assets or working capital.

• Increasing amount of credit supplied by credit cards.

• Bank statements are not reconciled every month.

• Supplier discounts rarely taken for early payment.

• Bank debt expenses increase every year.

• No accounts receivable report done on a weekly basis.

• Lots of unsold inventory.

• The only communication with your accountant/CPA is in April to discuss tax avoidance strategies.

• Showing profits but no cash.

• No handle on company cost structure of break-even level.

If you identified even one of these danger signals in your business, your business is in danger of failure. As the economic conditions continue to challenge small businesses, it is vital that you educate yourself about how to better manage your business, according to the SBDC.

The Small Business Development Center offers free consulting for small businesses. Contact Jenny Dougherty at 283-8585 to schedule a time to begin working on strengthening your business.