Red flags that your business might be in financial trouble

These business financial red flags are so important for business owners to know.

As accountants, we get to see the full picture of how businesses operate, from healthy growth to the more difficult times. One thing we’ve learned is that most financial issues don’t come out of nowhere. There are almost always early warning signs.

The good news? If you spot the red flags early enough, you can usually take action before things get serious.

Here are some of the most common signs that your business might be heading into financial trouble:

Even if you’re making sales, if there’s never quite enough in the bank to cover your bills, that’s a problem. Businesses don’t go under because of lack of profit, they go under because they run out of cash.

Late-paying customers, poor credit control, and high overheads can all put pressure on your cash flow. If you’re constantly juggling payments, dipping into reserves, or relying on overdrafts just to keep going, it’s time to step back and look at the bigger picture.

Short-term borrowing can be useful for growth or investing in your business, but if you’re using it to cover every day running costs, that’s a red flag.

Paying off one credit card with another, or only ever covering the interest on a loan, usually means the business is under financial pressure. Left unchecked, debt can spiral, especially if income doesn’t increase.

It might feel like a short-term fix to delay a tax payment or put off a supplier, but it’s a risky habit. HMRC can add penalties or start enforcement action. Suppliers might stop delivering goods or switch to stricter terms, which can affect your ability to trade.

If you’re constantly prioritising who gets paid each month, it’s worth reviewing your financial position in more detail. You might need a new payment plan or to renegotiate terms.

One of the biggest missed opportunities we see is businesses not using their accountant as a proactive partner. We’re not just here to file tax returns, we’re here to help you understand your numbers, plan ahead, and avoid trouble.

If you’ve been feeling uncertain about your business’s direction, or if any of the issues sound familiar, speak to your accountant. We can help you:

• Review your cash flow and profitability
• Create financial forecasts and budgets
• Look at debt management or refinancing options
• Identify ways to cut costs or improve margins
• Plan for growth or recovery

Getting expert advice early can make a huge difference and it can often turn things around much faster than you might expect.

A fall in revenue is a clear red flag, but even if sales are steady, if you’re not making money, something’s off.

Rising costs, under-pricing, or changes in customer demand can all eat into profit margins. If you’re working flat out but not seeing results, it’s time to reassess your pricing, costs, and product or service offering.

If you’re not sure how your business is really performing, you’re essentially flying blind. Many business owners rely on their bank balance or gut feeling, but that’s risky.

Without up-to-date accounts, cash flow forecasts, or proper budgeting, it’s easy to miss problems until they’ve grown. Regular financial reporting gives you the information you need to make better decisions and avoid nasty surprises.

It might not seem like a financial issue, but unhappy or overworked staff can seriously affect business performance. High turnover means higher recruitment and training costs. Low morale can impact productivity, customer service, and team culture.

If people are leaving, or if your team seems anxious or disengaged, it’s worth checking if financial stress or workload might be part of the problem.

Most businesses hit a rough patch at some point. The important thing is how you respond to it. If you’re seeing some of these red flags, don’t ignore them.

If you have any concerns or questions, get in touch for a friendly chat!

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