5 Signs Your Business Has a Cash Flow Problem (Before It's Too Late)
Early detection of cash flow issues can save your business from serious trouble
Cash flow problems are the silent killer of otherwise healthy businesses. You might be profitable on paper but still struggling to pay bills. The key is catching the warning signs early - before you're in crisis mode. Here are the five critical indicators that your cash flow needs attention.
1. You're Constantly Chasing Late Payments
If you spend significant time every month calling customers about overdue invoices, that's a major red flag. Late payments from customers directly impact your ability to pay your own bills on time.
- More than 20% of your receivables are over 30 days late
- You've had to delay paying your own suppliers because customers haven't paid you
- You know exactly which customers are always late (and haven't done anything about it)
2. You Can't Answer 'Where Does the Money Go?'
When someone asks where your money goes each month, you should be able to answer within 30 seconds. If you can't, you likely have spending leaks that are draining your cash without you realizing it.
- You don't know your top 5 expenses off the top of your head
- Unexpected charges regularly appear on your bank statements
- You're not sure if this month was better or worse than last month
3. Your Business Account Often Drops Below a Comfortable Level
Every business owner has that number - the account balance that makes them nervous. If you're regularly dipping below that level, or if you've moved that 'comfort number' lower over time, it's a warning sign.
- You check your bank balance anxiously multiple times per week
- Payroll days cause stress about whether funds will clear
- You've started delaying payments to keep more cash on hand
4. You're Using Credit to Cover Regular Expenses
Credit is fine for investments and growth. But if you're using credit cards or overdrafts to cover normal operating costs like rent, salaries, or utilities, you have a structural cash flow problem.
- Your credit card balance keeps growing each month
- You've maxed out your overdraft facility
- You've considered getting another credit line just to 'have buffer'
5. Revenue is Growing But Cash Isn't
This is the most dangerous situation because it feels like success. Sales are up, new customers are coming in, but somehow your bank account isn't reflecting this growth. This usually means your costs are growing faster than revenue, or your payment terms are working against you.
- You've had your best sales quarter but still feel cash-strapped
- Taking on new customers actually makes cash flow worse in the short term
- You're hiring and spending to support growth you can't actually afford yet
What To Do Next
If you recognized your business in two or more of these signs, it's time to take action. Start by creating a simple 13-week cash flow forecast - just list what money you expect to receive and what you need to pay each week. This alone will give you visibility and control. For a deeper analysis, consider working with a financial analyst who can identify the root causes and create a plan to fix them.
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