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As trusted advisors to our clients, we want to be certain we are always providing the best possible service to help small businesses succeed. That’s pretty easy when things are rosy. Sailing a ship through calm seas doesn’t require as much guidance. But what about when dark clouds roll in and the waves become tsunamis? That’s when they need us the most.
But how do we know? What are the Red Flags that alert us to troublesome conditions? Here are some things that should give us clues.
Things we SEE:
Have your clients received notices from the IRS regarding late or missing payments? Some small businesses make the huge mistake of holding on to payroll taxes in the interest of cash flow. There are many reasons why this is a bad idea. Most importantly, it is not their money. Payroll taxes belong to the employee. Failure to turn them in is stealing. Ultimately, a company can be shut down for failure to pay the payroll taxes. Padlocked. Seized. Frozen.
The same goes for Sales Tax collected. That is not your clients’ money, either. It’s not part of income. It’s a liability that must be relieved. The same dire consequences could occur. If you see these things happening, offer alternatives to stashing the cash. Maybe you can help them find other ways to free up cash so that they don’t incur penalties or worse.
If your client uses a payroll service that impounds the taxes for each payroll, he may choose to process payroll manually. If all of a sudden his employees are receiving paper checks instead of direct deposit, this is a definite signal that something is wrong. Either he’s avoiding the day or two that the payroll company drafts the funds prior to payday, or he’s hoping to postpone paying the taxes.
Are you seeing a lot of late fees on the loans and credit cards? NSF fees from the bank? This is another sign that the client has cash flow problems. Of course, it could also be that they just aren’t paying attention. But that’s an opportunity to prove your value as well. Help them get ahead of the fees by setting up automatic payments or monitoring the account balances for them. You could also offer Cash Flow projections to help them plan.
Another huge warning sign would be unexplained cash, both in and out. A business owner desperate to meet payroll may take cash from any available source. Uncle Fred may be friendly and reliable, but there could be others less reputable. Or less forgiving. You may be able to help them find funding sources that are less risky.
A big cash outlay could also be a problem. Is the owner suddenly transferring large sums to his personal account? Why? If the business is thriving and cash is abundant, this is great. But what if they can barely cover expenses anyway? You may want to ask some exploratory questions to determine whether you can help.
Things we HEAR (or don’t hear):
Financial problems are embarrassing. Most people don’t want to talk about them. So your client might be telling you something by not saying anything at all.
Do you send emails that go off into a dark void never to be answered? It could be that your client just doesn’t know what to say to you or how to say it. Sometimes, “I need help,” is hard to voice. That may be what the silence is saying. Or it could also be saying, “everything is fine; leave me alone,” but if you’ve paid attention to things that you can SEE, then you’ll know which message your client wants you to HEAR.
In a different scenario, maybe your client does respond to you, but the answer is evasive. You need to master the art of reading between the lines to be most helpful. Sometimes you may sense a change in tone of voice, or feel the stress radiating off the page of the email. All are signals that something is going on. Each client is different, and each will have different clues that can alert you.
Being a trusted advisor requires many skills. In order to offer the best value to your clients, you’re going to have to develop all of them. While no one can control the weather, you can certainly offer the tools and experience to help steer your clients to calmer water. And maybe even help them pick out a newer, bigger ship!