The following factors are a good place to start when gauging the health of your company’s finances.
Track your finances: Are you accurately tracking both the inflow of revenue and outflow of expenses? Not having a good idea of how much your business spends and earns will leave you ignorant of its financial health and unprepared for slow periods.
Monitor your debt: Continually borrowing money and paying interest fees is not healthy for a business. Heavy debt can overburden a company and prevent you from investing in your company’s future.
Stay on top of customer invoices: If your customers haven’t paid invoices in 90 days, odds are they’ll never pay. Without that cash coming in, you won’t have money to pay your expenses.
Have a safety net: Businesses should have in excess of two months of their operating expenses in reserve to cover themselves. Are you prepared to cover unforeseen expenses without taking a loan or opening a line of credit?
