How to spot the early signs that your business may be facing financial difficulty
Many businesses across the UK have been financially affected by the cost-of-living crisis and the rise in inflation and have also suffered from the fallout of Covid-19 loan schemes and companies’ failure to make repayments.
While it is not all doom and gloom, it is vital for businesses to spot the early warning signs that they might be running into financial difficulty in the near future.
By catching these signs early, you could potentially safeguard your business from disastrous outcomes.
A prime warning signal of financial trouble is consistent cash flow issues.
If your business is regularly struggling to pay suppliers or salaries on time or frequently relying on overdraft facilities, it may suggest that your business is on shaky financial grounds.
Delay in obligatory payments
Another red flag is a delay in statutory payments such as VAT or Corporation Tax. These payments are critical and should be the first to be paid.
Any difficulty in meeting these obligations usually points to a troubling financial situation.
Persistent losses should also raise alarm bells. While occasional periods of loss are expected in business, if these losses extend over several financial quarters, it could indicate a deeper financial problem.
Pressure from creditors
You may not perceive your business as being in any financial danger, but if money owed to external parties or other businesses begins to accumulate, creditors may become increasingly assertive in their efforts to recover their funds.
A rise in urgent demands for money or threats of legal action is a clear sign that you should assess the financial health of your business.
If your business exhibits any of these warning signs, it’s essential to take immediate action.
If you are worried about the financial state of your business, please contact us today for expert advice.