Our economic crisis has grown to immense portions. More than 250 home mortgage companies have gone out of business or have entirely left the industry. Housing prices have plunged, foreclosure rates have soared, banks have been seized, and financial institutions are reeling from multibillion-dollar losses.

It is a terrible tragedy when someone loses their home because they cannot pay their mortgage. I have a friend in California whose monthly loan payment went from $2,000 a month to over $6,000 per month due to a special mortgage program that was supposed to provide him with a manageable payment. Can you imagine his desperation?

It is hard to believe that almost a third of the homeowners facing foreclosure never even contact their lending institutions. They dont deal with the problem at all, they just close up the house and move out. The current state of affairs threatens the survival of some residential AV installers. New home construction is at a standstill, and existing homeowners are really watching their budgets.

The Check List
How is your company dealing with the current economic difficulties? Have you checked your financial vital signs? Here are the key indicators to check:

1. New Sales. How do your year-to-date sales compare with last year? Are you meeting your sales targets? In a good year, your sales should increase by 10 percent or more. If your sales are down, you need to know by how much. Sales drive your entire cash flow and are the lifeblood of your company. If your sales are down significantly, then this is the most important sign that you are headed for trouble.

2. Receivables. Even if you sell and install fantastic systems, it is all in vain if your client does not pay you. If a homeowner experiences financial problems he will be forced to pay for essentials like house, cars, and utilities before paying for your gear. Once your equipment is installed in their home, it can be nearly impossible to recover. Solid legal language in your contract will be your best source of help of recovering with non-paying customers.

3. Payables. Are you keeping up to date with your payments to your suppliers? Are you stretching them out with late payments? Are you on hold with some suppliers?

4. Working Capital. Do you have money on hand for payroll, expenses, and jobs in progress? Have you pushed your credit cards and bank line of credit up to the limits?

Stop and check these critical financial warning signs for your company. Dont be like the homeowners above who were heading toward foreclosure and did not take any action. Doing nothing in the face of business failure is the worst choice that you can make. If you avoid this painful checkup or choose to be in denial about real money problems that you are dealing with, you will miss your chance to act before its too late.

Must Dos
If your books are not current enough to give you this vital information, call your accountant today and ask for an emergency checkup. If you are in the early stages of trouble, there are many things you can still do to correct the situation. The longer you wait to correct the problem, the harder it will be to deal with.

If your sales are off and your credit is over the limits, you need to understand the risk of what can happen very quickly. For AV installers, the path to business failure often goes like this: You make some new sales this month and the customers give you $50k in checks to begin the work. You happily put the $50k into the bank, and because you have been falling way behind paying your bills, you can catch up on rent, payroll, and your truck payments. Because you are still behind paying some of your suppliers, they insist on COD for the equipment you sold. The problem is that you used the $50k to pay off previous bills to keep your business alive. Now you are out of money and credit, and you have absolutely no way to pay for the equipment that your customers ordered. They already paid you, and then you spent their money on your bills, not their equipment. Without the equipment there is no way you can finish their job. Checkmate. All of a sudden, youre out of business.

Dont go there. Do a financial checkup this week.