5 reasons why your business has trouble getting out of the red

5 reasons why your business has trouble getting out of the red


Busting your gut, but still finding your business is in the red? Fixing these common traps could help send your business back into the black.

Being your own boss and running a business is one of life’s most rewarding experiences, but it can also be punishing. Working late nights and weekends is a fairly common activity amongst business owners as they try to make the numbers add up and turn a juicy profit.

But what if your hard work just isn’t paying off? Being overwhelmed by paperwork and back-office process work can seriously damage the prospects of any company.

Here are five common traps business often fall into:

1. Drowning in paperwork

Does your desk look like a tornado went through it? Are there piles of bills, proposals, copies of inquiries, and receipts strewn around? If this is you, then it is no wonder you are in financial disorder. Unpaid bills can affect your credit rating, preventing future investment in your company. Meanwhile lost inquiries can lead to not only a loss of sales, but also damages your reputation in the eyes of the customer.

2. Disorganised invoicing

Invoices are the promise of money. By not sending them out on time (or at all), and failing to follow up, you run the risk of never seeing your hard-earned cash. It is imperative to your business that you maintain a well-organised system where invoices (along with reminders and arrears notices when necessary) are sent out on time, every time.

3. Inventory chaos

Have you been running your business on the fly without taking time out to take stock? Chances are, your inventory is in disarray. By forgetting to monitor stock regularly, you run the risk of under-supplying orders, experience order backlogs and client dissatisfaction. On the other hand, failing to track inventory levels can potentially lead to over-stocking unpopular items that take up valuable real estate and do nothing to improve your bottom line.

4. Not managing debtors properly

Did you know 60% of invoices in Australia are settled beyond the standard 30-day payment period? This frightening statistic from Dun & Bradstreet shows why you need to manage your debtors tightly. You never know if your debtors are, quite possibly, facing their own non-payment issues from their own debtors so you need to set clear, short payment terms and have a defined plan of action if they don’t pay up.

5. Not setting a budget and letting your costs blow out

Office supplies, utility bills, wages, rent; little things can add up to a lot. According to ASIC, 41% of companies failed in 2012-13 due to inadequate cash flow or high cash use, so the tighter the budget you can keep, the better.

To prevent your business from haemorrhaging cash, you need to set up proper budgets for every project and keep an eye on costs like a hawk. Not only will this help you become super organised, keeping set budgets will also enable you to predict cost projections effectively.

What to do next?

A greater sense of organisation and automation of process is often the key to moving past these problems. Online software can assist by providing you timely access to your files from many of your devices, and automating many of the everyday tasks most of us would find tedious. Investing in the right accounting solution will yield considerable benefit in the long term.

For more information on how online accounting software can help tackle problem areas in your business, visit the Reckon website.

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