In this week's episode of "I Hate Numbers," we tackle a critical topic that every business is bound to confront sooner or later — the signs of impending financial distress. Last time, we delved into the emotional challenges of making tough decisions, particularly the decision to let go. Today, we shift the spotlight to identify four unmistakable signals that could signify trouble on the horizon. Whether you're a creative soul or a small business owner, these warning signs are universal, and recognizing them early might just be the key to steering your business away from disaster.

The Odometer of the Business

(Cash Flow)

Driving a business is akin to navigating a car, and just like a car's dashboard provides vital information, your business needs indicators for effective navigation. The critical gauge here is your cash flow, the lifeblood of your business. As the saying goes, when the cash runs out, the lights go off. Regularly monitor your cash flow, and notwithstanding, keep an eye on credit customers, as exceeding credit terms could be a red flag.

The Dashboard

Much like a car's dashboard reveals critical information, your business should have its own set of vital signs. For retailers or manufacturers, efficient inventory turnover is the engine of the business. The speed at which goods move in and out represents money tied up in your business, and efficient turnover is crucial. Moreover, it is important to align your strategies with industry challenges.

Client Base and Market Positioning

Beyond numbers, assess whether your client base is dwindling or if there's an over-reliance on a few clients. Watch out for declining spending and potential challenges in acquiring supplies. Utilize digital systems to gain insights and simultaneously monitor market dynamics.

Operational Efficiency

Operational efficiency is crucial for long-term success. Evaluate delivery times, customer complaints, and internal issues. Recruiting the right team is essential. Similarly, align your strategies with industry challenges, and consider future capacity when taking on new business.

Conclusion and Action Steps

Being aware of these warning signs is crucial. Develop a cash flow budget, reassess your strategy, and adopt a planning mindset. Therefore, seek support and assistance when navigating business distress. Remember, a proactive approach can make all the difference.

We encourage you to share this valuable information with those who could benefit. Consequently, as we navigate financial challenges, let's support each other and build resilient businesses. Until next time, keep that space between your ears healthy and wise.

In this week's episode of I Hate Numbers, episode 198, I'm going to be looking at a topic that sooner or later every business is likely to face and that's the signs that your business is in some form of distress. And by distress I mean financial stress when the end is in sight. Last week's episode we looked at the emotional challenges the emotional turmoil of that decision to let go and in this week's episode I'm going to shine the spotlight and look at four signals that indicate trouble lies ahead.

Whether you are a creative soul or a small business owner, the warning signs are universal, and recognising them sooner rather than later could be the key to steering your ship away from disaster.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another podcast episode on I Hate Numbers. The channel that's got a simple mission is to help you and your business make more money, reduce your stress and anxiety, help you win those battles that go on between your ears, increase your financial awareness, reduce your tax liability and have the business you aspire to.

That's not a bad mission if I say so myself. Let's crack on with the podcast. The first thing I'm going to look at is what I call the odometer of the business. For those of you at home thinking, what does he mean by an odometer? If you're a car driver, you'll know that when you drive your car on that journey, you've got a dashboard panel that tells you things like the speed of which your car is going and how much fuel is in the tank.

Those indicators, that dashboard sends out vital signals for you to be able to drive that car in a safe manner and to not get into too many problems. Now, your business. Is that car and just like driving any car you need indicators to be able to navigate that path as effectively as possible now a vital gauge in your car is your petrol in your business the most critical gauge of sustainability, prosperity and the ability to go forward is your cash flow. As a saying that I often like to share with my clients, when the cash runs out of your business, when the access to cash goes, the lights go off.

It's a stark reality that cash being that livelihood and lifeblood of your business means do not pass go, do not collect 200 pounds. Cash flow is the fuel gauge with which your business will come to a halt. So keep a close eye on your cash flow. Monitor it carefully. Even if it's not a practice you're used to doing. Have a look at your bank statements on what money is in the account, what belongs to you is certainly a good step forward.

If you have a business where you've got credit customers, monitor them carefully because they could be exceeding their credit terms either consciously or otherwise. This will be a red flag signalling trouble ahead. A robust credit control system is your GPS through these financial roads. Now when you're checking your bank balance, hopefully you've set up a system whereby monies that you need to pay taxes, monies that you need to pay certain obligations outside, you're putting those to one side, and therefore what you see in your current account is what you've got to spend on maintaining and operating your business.

Get into the habit of looking at those bank balances on a regular basis. Get into the habit of looking where you are with your customer accounts. Who's overdue? What's outstanding? Signal number two, the dashboard. Now just as a car's dashboard reveals critical information, your business should have its own set of vital signs.

So if you are a retailer or a manufacturer, you need some way to monitor and review the inventory that you've got. The speed of the inventory moving through the business is crucial. How quickly do the goods come in, and how quickly do they leave your warehouse, your factory, your storage area.

Efficient inventory turnover is the engine of your business. That represents money tied up in your business until it goes out the door, until it's sold on to somebody and used, then that is dead cash, idle money lying around. And we don't want that for you. Signal number three, your client base and market positioning.

Now we need to look beyond your numbers. Is your client base dwindling? Are they spending less for each transaction? Do we have an over reliance on a few clients? It's a dangerous game to play. The risk becomes exacerbated and your clients then have that stronger negotiating position as well. Now if you're dealing with supplies, any difficulty in acquisition

could indicate impending challenges. So assess where you are in your marketplace. Are your audiences declining? Are they spending less with you? Your digital systems, small plug to zero, should give you those insights and the indication that helps you monitor where you are. Is there pressure on your capacity?

Non financial indicators are as insightful as the raw numbers themselves. Let's move on to signal number four. The operations, how efficient you are at doing things. Now moving beyond the financials, consider operational efficiency. Does your business take longer to deliver work to clients? Does that result in more customer complaints?

Are there more delays? Are there internal issues in terms of recruiting staff, having the right calibre, having the right group of freelancers that you're working with? All of these will be brewing up to potentially present problems or, if done correctly, give you solutions. Evaluate your ongoing capacity, not in the here and now, but what it will be like with future orders coming in, future business that you're looking to pick up.

Where do you stand in the marketplace? Align your strategies with the specific challenges of your industry. What can we say in conclusion? What can be the action steps? What does this mean for our planning? Now, once you are aware of these warning signs, make sure you've got a system in place that you can actually monitor, review and take action.

Develop a cashflow budget to project your financial health. And if you don't have a cashflow budget in hand, then apart from me pulling my hair out, then that's something you need to address sooner rather than later. If you're at that stage where you're injecting your own personal funds, witnessing declining margins, and those funds are being invested and put into the company to keep it going,

are you really putting a sticking plaster over something more tragic, something more dangerous? If so, it's a clear sign to reassess your strategy, pick up your planning mindset and get that lighthouse that's going to guide you through those turbulent waters. Now folks, thank you very much for lending your ears on this podcast episode of I Hate Numbers.

If you found this information valuable, I'd love it if you could share it with those who you feel will benefit. Remember, if you're navigating financial challenges, seek support from your network. By all means, drop us a line, see where we can help you with planning, where we can help you put those correct digital systems in place, develop your internal infrastructure so you can manage those choppier waters as well as sailing in calmer ones.

Feel free to reach out for further assistance. Until next time, keep that space between your ears healthy and wise. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.