Recognising the early warning signs of financial difficulty for your business

Published on July 10, 2024 by Gareth Hunt
Gareth Hunt, Head of Business Recovery at RPG Business Recovery incorporating Crawfords

As a business owner, it’s crucial for you to be in control of your finances but also to recognise early signs of financial trouble and know when to take timely action and explore possible solutions.

Sadly, in my many years as an Insolvency Practitioner, I have seen too many business owners who have ignored the initial warning signs.  Perhaps they thought they could ride it out, that the problem would go away.  But too often, the problems only get worse.

Taking advice at an early stage may help you to save your business, or at the very least find a better outcome.

Understand your financial position

The most important thing you can do is to maintain up to date records.  Your accountant may do this for you or they can direct you towards accounting software that is appropriate for your size and type of business such as Xero cloud based software.  This can give you an accurate and current picture of your financial position, especially if you set up bank feeds.

Another key element is to manage cash flow; again, your accountant should be able to help. It is imperative that income & expenditure are closely monitored, ongoing contractual commitments identified and forecasts prepared so that any potential difficulties can be identified as early as possible and further advice sought.

I suggest that you hold regular meetings with your accountant and also ensure that all directors of the business are fully appraised of the business’ financial position.

Tell-tale signs that your business is approaching financial distress

In isolation, it may be easy to dismiss these signs.  But, they tend to be symbolic of bigger problems that need to be addressed as a matter of urgency.  They won’t just go away.  Don’t forget, the sooner we can help, the more options are available.

Issues with suppliers
  • Suppliers may insist on payment upfront: if your suppliers start demanding early payment, it’s a sign they are concerned about your ability to pay.
  • Enforcement of Retention of Title: suppliers worried about not being paid might take steps to retain ownership of their goods until payment is received.
Other external pressures

These are all indicators of perceived concern regarding the financial stability of your business

  • Threatened or commenced legal action
  • If your bank reduces credit facilities or instructs an independent business review (IBR)
  • Payments or direct debits returned, unpaid by the bank
  • Tax arrears – if you have tax debts older than six months and ongoing enquiries from HMRC, it’s a significant red flag.
Short term “fixes” you may be making
  • Making round sum, but incomplete payments to suppliers
  • Delaying your payroll runs
  • Seeking additional financing – are you requesting details about working capital loans, overdrafts, or corporate credit cards?
  • Introducing personal funds into the business to fund payments

If you notice any of these warning signs, it’s essential to act quickly.

Take prompt action
  1. Explain the situation to an expert: Contact us to discuss your financial concerns. We’ll help you understand the issues and offer some initial advice completely free of charge.
  2. Receive tailored guidance: Based on the specifics of your situation, we’ll provide guidance on possible solutions.
  3. Decide on next steps: Together, we can determine the best course of action for you and your business.

The sooner you address these signs, the more options you’ll have to navigate through the financial difficulties. Don’t wait until it’s too late—reach out to us as soon as you spot trouble.

Gareth Hunt and the RPG Business Recovery Team are always very happy to have an informal discussion with any businesses potentially in distress and to discuss options with them.  It’s best to take advice as soon as possible when more options are likely to be available.  Please call 0161 608 0000 or email to speak to an Insolvency Practitioner in Manchester for further information.

This article is for information only. Please take professional advice relating to your own personal circumstances before making any decisions.

Written by Gareth Hunt

Gareth, who joined RPG in March 2021, is a member of the ICAEW and R3. Gareth has gained significant experience dealing with corporate and personal insolvency together with advisory work including liquidations, CVA’s and administrations from a wide range of industry. He also assists individuals on bankruptcy and IVA’s. Email:

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