A Financial Reckoning

Are your business finances in good shape or are you headed for a financial reckoning? As I observe the financial picture of our economy and in particular our government, I cannot help but wonder how long this way of operating can continue.

What Way of Operating?

Our federal government at the time of this writing is more than $17 trillion dollars in debt. Think about that a moment. A trillion is a hard number to get your mind around. With a U.S. population of around 317 million that means that each man, woman, and child in the country is on the hook for around $54,000 if the debt had to be paid evenly by each person. Of course, that is not the case as many people would have no hope of paying $54,000, so that means others would have to pay more. But wait, it is worse than that. The $17 trillion is only the debt that is recorded. There is much more debt that will need to be added to the government’s balance sheet in the future. I’ve seen estimates of in excess of another $60 trillion. However, that’s enough on the government’s debt as I’m only using those numbers to get your attention. In the posting Do You Budget Like the Government? I wrote a little about how businesses often operate the same way, but just on a smaller scale.

Face the Music

As you know, the phrase “Face the Music” refers to having to accept the undesired consequences of one’s actions. With the government debt situation, one of those consequences is interest payments that are out of hand and continuing to grow. How many businesses are in a similar situation? Perhaps a company is attempting to grow too fast or is over-leveraged. Perhaps they are trying to be all things to all people. But, if you look at the financial statements of these companies you may see a bleak picture. For example, accounts payable may be way past due. The company may be behind on debt payments. Maybe a line of credit is never getting paid down to zero. Even worse, they may be behind on tax payments. In their heart they know this way of operating cannot continue forever, but they are unwilling to face a financial reckoning. Whether they want to or not, at some point they will have to face the unpleasant realities or they will end up bankrupt.

Broke Business Man

Some Steps

If you own a company or are a manager in a company that is in the situation of above, then here are some things to do:

  • Realistically assess you financial situation
  • Decide on a plan of action
  • Contact creditors and discuss your plans for paying them
  • Revise your plan of action based on conversations with creditors
  • Execute your plan of action
  • Carefully monitor income and expenses
  • Avoid unnecessary spending like the plaque
  • Avoid tax delinquency like a double plaque
  • If you are behind on taxes, make it a priority to get that current
  • Keep creditors advised of your situation so they are not caught by surprise
  • Finally, when you are back on track, do everything you can to stay that way

What is Your Company’s Situation?

When you examine your company’s balance sheet, do you foresee a financial reckoning in your future? If so, take action now before it’s too late.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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