How to Save Your Small Business from Declaring Bankruptcy

If you are business owner, you understand there are countless risks that can affect your business, sometimes with little or any warning. While in many situations you can react in time to minimize the affect on your business, other situations may be so damaging that your business cannot recover, for example, the loss of your largest customer or a key employee. However, through detailed planning and never putting off regular consideration and analysis of the health of and risks to your business, your business will be in the best position to survive the reality of a fatal risk becoming reality. Here a few steps you can take to strengthen the resolve of your business: 

Develop and Implement a Risk Management Plan – Careful identification of all potential risks and the development and implementation of a risk management plan is critical for every business. The form and content of the plan will vary somewhat depending on the nature of your business however they all serve the same purpose. Talk to your accountant for some guidance or spend some time on the internet researching the topic.

Know the Current Financial Position and Profitability of your Business – Having current and accurate financial information is a corner stone for every business, regardless of size. Without good and timely financial information proper decision-making and planning cannot be done. Strive for at least monthly financial statements, including a balance sheet, income statement and changes in cashflow, to be completed within 10-14 days of each month-end. Again, speak to your accountant about putting a financial reporting process in place.

Prepare Projections of Future Income and Cashflow – While the previous step tells you how your business has done in the past, projections show you where it’s heading in the future. By analyzing the past, you can learn from it, make changes, and project the results on your future profitability and cashflow. If your sales or profitability have been decreasing this step is critical to determine the future cash needs of the business which may include the need for new capital. The last thing you want to happen is figuring out on payday that you have insufficient cash to pay your employees.

Keep Current on all Tax Filings and Remittances – We see business situations everyday where companies fall behind on their tax remittance obligations because they don’t have enough cash. The tax authorities can be a silent creditor for a period of time, but once their compliance and collections departments have identified a problem they have powerful rights to handcuff a business including garnishing your receivables or freezing your bank account. As well, these debts bring with them high interest and penalties. Furthermore, if you do need to borrow more money from your bank or another lender, having obligations to the provincial or federal government will make getting approval very difficult.

The motto of this blog is plan, plan, plan and don’t let the everyday demands of your business, employees, customers or suppliers cause you to put planning off until tomorrow. If you feel you need some help with getting your business’s planning or financial position on track schedule an appointment with your accountant today or contact your local MNP Ltd. office to set up a free consultation.