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Every business will have a particular way of tracking and measuring how its business is performing. If you can identify the warning signs, you can take early action to turn your business around. The key is to set warning triggers that indicate deterioration to a level that causes concern.

The easiest cash flow warning trigger tends to be your monthly sales revenue; when it falls below a certain amount, you need to cover overheads or your growth target.

The reason could be:

• The number of new leads in your pipeline slows and you’re finding it much harder to close new customers. Less business from existing customers, fewer new leads from the sales team, inbound queries from prospects, demos or meetings booked, or passing foot traffic.
• Existing customers are leaving or their spend is reducing over time or they’re switching to the competition.
• Your inventory turnover rate (ratio of cost-of-sales to inventory) has slowed, which leads to holding too much inventory (or worse, obsolete). The problem is your product mix isn’t what customers want.
• Web traffic, social media activity, or the number of online queries has dropped.

Setting your triggers

If you can, focus on the drivers that significantly affect your business’s performance, are measurable, can be compared to a benchmark such as last year’s figures or an industry average, and, most importantly, can be acted upon. For example:

• Unhappy employees through increased staff turnover, in-fighting, petty arguments or an over-abundance of sick leave.
• Falling revenue per employee, which can imply disinterested or bored staff.
• Increase in customer dissatisfaction, returns, refunds and complaints, which hints at poor delivery or fulfillment.
• Increase in downtime (staff or machinery) that can be a cause of inefficiency, poor scheduling or mismanagement.

Create your own list of business warning signs that could indicate that all is not well.

Industry triggers

Determine what your industry measures, for example:

• Retailers can look at foot traffic near their location, web traffic to their online store, and the changing demographics of either consumers or businesses that live or work nearby.
• Manufacturers may track work in progress, the number of contracts they have in place and the speed of their distribution channels.
• Software subscription providers will want to see the speed of adoption of their solution, how many leads are in their sales channel, on-boarding and downtime.
• Agricultural businesses would monitor yields, market prices, the weather and output ratios.

Warning triggers only work when you can compare to past data. Use any past figures as a benchmark for current performance and try to compare your business with other similar businesses, especially competitors.