With the Autumn Budget looming and business costs continuing to bite, insolvency expert Molly Monks reveals five red flags that could signal your firm is heading for financial trouble — from cash drying up despite strong sales to bills piling up and relying on the next big deal to stay afloat.
YOUR business could be heading for collapse – and you might not even realise it.
From bills piling up and cash disappearing despite strong sales to relying on one big deal to keep the lights on, there are warning signs that a firm’s finances are in trouble long before it goes bust.
With business inflation at its highest level since June 2023 and confidence remaining fragile, insolvency expert Molly Monks of Parker Walsh reveals the five red flags every business owner should watch for – and the steps to take before it’s too late.
BDO’s September Inflation Index reached its highest level since June 2023, while ICAEW’s latest Business Confidence Monitor found confidence had fallen back into negative territory. The British Chambers of Commerce also reported that inflation remained businesses’ biggest concern, cited by 60% of firms, while one in four reported falling domestic sales.
Molly said: “Businesses don’t usually collapse overnight. Often, there are warning signs that something is wrong, but directors become so focused on keeping the doors open that they don’t step back and look at the bigger picture.
“Rising costs can be particularly dangerous when customers are spending less or taking longer to pay. A business might still be busy, but if its costs are rising faster than its income, it can quickly find itself in trouble.”
The five warning signs your business could be heading for trouble
- You’re busy, but there’s never any money left
Strong sales don’t necessarily mean a business is financially healthy. If money comes in and immediately disappears on wages, rent, suppliers, tax and other bills, cash flow could be deteriorating.
- You’re paying bills late – or deciding which ones can wait
Delaying payments to suppliers, falling behind on tax liabilities or struggling to meet payroll are serious warning signs. Borrowing more simply to cover existing bills can make the underlying problem worse.
- You’re relying on the next big order to save you
If the business only survives when an expected contract lands, a customer pays on time or an investor comes through, the cash-flow forecast may be too fragile. Directors need to plan for what happens if those payments are delayed or never arrive.
- Your costs are rising, but you can’t raise your prices
Businesses may absorb increases in energy, materials, staffing and other overheads because they fear losing customers. But if profit margins keep shrinking, higher turnover can disguise a business becoming less sustainable.
- You’re avoiding the numbers – or putting off asking for help
If directors are repeatedly revising forecasts, juggling payments or avoiding difficult conversations with creditors, the problem is unlikely to disappear by itself.
Molly said: “One of the biggest mistakes is waiting until there is no money left before asking for advice. The earlier you understand the position you’re in, the more options you may have.
“If the business is viable but under pressure, there may be ways to restructure costs, negotiate with creditors or address cash-flow problems. But you need an honest picture of the finances first.”
What should directors do before it’s too late?
With the Autumn Budget approaching on 28 October, businesses will be watching for measures that could affect their costs and confidence. But Molly says directors should not put off action while waiting to see what the Chancellor announces.
She said: “Start with a realistic cash-flow forecast, identify which payments are due and when, chase overdue invoices and speak to creditors before missed payments become a pattern.
“If you are worried that the business cannot pay its debts, seek advice from a qualified insolvency professional promptly. Ignoring the problem or taking on more borrowing without understanding whether the business can afford it can leave directors and creditors in a more difficult position.”
For businesses already feeling the squeeze, the difference between an early warning and a crisis may come down to how quickly they act.
