Warning signs your business is in financial trouble

Cash naturally comes in and goes out of your business. But if you find that you’re always in need of more cash than you have, your business may be under financial strain.

Some of the signs your business might have a reduced cash flow include:

• a large cash deficit
• regularly late customer payments
• difficulty paying your suppliers
• low profit margins.

Falling demand for your products or services can have a huge impact on your customer base and bottom line.

Changes in customer behaviour might include:

• a decrease in sales
• loss of major customers
• more complaints or refund requests.

If you’re experiencing these changes, you may want to communicate with customers to ask for feedback. This could include sending a survey or reaching out by phone or email. 

If you're having trouble keeping up with your bills or paying them on time, it could be a sign of financial trouble. Missing payments may suggest that your business does not have enough funding to continue running.

If you’re in a position where your debts are mounting, you need to look for ways to improve your cash flow. Think about:

• forecasting your cash flow weekly to understand exactly what you owe and when – you can use a cash flow statement
• selling any old or excess stock and inventory
• collecting outstanding debts when you haven't been paid.

Losing staff can be an indicator that your business is in financial trouble. If you often need to replace staff, you may be spending a lot of time and money on training new people.

If staff retention is a problem, it's important that you identify why to protect your bottom line. Think about:

• identifying your ideal candidate before you interview and recruit employees
• rewarding staff for their performance
• creating a work/life balance
• providing staff development and training.

It’s important that you resolve any signs your business is in financial trouble as soon as possible. Putting it off may cause issues to get worse and result in needing to close your business.

To help get your business back on track, consider the following tips:

• make sure you correctly set up your finances – you can ask a bookkeeper or accountant for help
• keep all your invoices, bank statements and other financial records in a record keeping system
• set aside time on a quiet day each week to update and review your financial records so you can identify any problems ahead of time
• learn how to understand and manage your finances effectively through financial management training
• prioritise taking care of yourself and your mental health through the support services that are available for small businesses.