Early signalling: recognise the signs of financial problems

Customers pay late. You are in the red in the bank. You can no longer pay the bills on time either. If this happens once, it is not so bad. But does it happen more often? Then it is time for action. Recognise the signs of financial problems and deal with them quickly. This is called early signalling.

What is early signalling?

Early signalling means spotting in time what situations are causing financial problems or debt. Maybe it is already the case with you when a big customer pays late. Or only when more customers pay late. Do you know where the limit lies for your business? Then you can take targeted measures. This will keep your business financially healthy.

The earlier you identify debts and take action, the healthier your financial situation remains. And the sooner you take action, the easier it will be to solve your problems. If you wait longer, solving debts is often more difficult.

Recognising signs

You can see signs of financial problems in yourself and in your business. There are financial and emotional signs. How big the financial problem is depends on your business, industry and personal situation.

1. Signs in your own business

Key figures show how your business is doing. For example, the number of orders you get per month. And the number of customers per three months. Or you can tell by the turnover per three months. Is it decreasing by, say, ten per cent? Then things could be going in the wrong direction. Annual profits also indicate the financial health of your business.

Besides your income, your expenses also say something about the financial situation. And whether there is a cash flow problem. For example:

• You have arrears of at least a month with suppliers or tenants. 
• Your staff costs are higher than last year, while your turnover is down. 
• Your average inventory has been running up for several months. 
• You pay invoices with private money. 
• A direct debit no longer works.

2. Financing and tax

Also watch out if a financier contacts you and wants additional information from you. Or if you cannot pay the business interest and repayments this month. Being in the bank once is no reason to panic. But keep an eye on not going over your limit on your business overdraft. And can't pay your taxes on time? See if you can apply for a postponement or a payment plan right away. You cannot defer paying VAT or payroll taxes. You pay collection interest on a deferred amount.

3. Private finances and personal circumstances

Your private finances can also tell you whether you have financial problems and debts. You can also recognise financial problems and debts early on from your emotional wellbeing. The following signs tell you about the financial health of your business, for example:

• This month you are making less income from your business than you need privately. 
• You have a shortfall in income and, as a result, you are falling behind on payments privately. 
• You feel insecure, worried and stressed. 
• You have private problems because of your business situation. 
• People around you are worried about you.

Take action

Take action at the first small signs of debt or a cash flow problem. Take immediate action so that you limit the financial damage. The more signs you get, the more important it is to get started right away. This will help you keep a grip on your finances. Pick up the following items today:

• Cut purchasing and operating costs. 
• Minimise inventory and consider whether a clearance sale will help you. 
• See if subscriptions such as energy, telephony and internet can be cheaper. 
• Make the best use of tax deductions. 
• See if you want to arrange financing and calculate the amount you need. 
• Sharpen up your payment terms so your customers pay faster. 
• Establish a business financial reserve (buffer) so that you can cover operating costs for about six months. This is how you cope with setbacks.

Tools for financial insight

Do the Geldfit Zakelijk Geldfittest (in Dutch). It will tell you how your business is doing financially right now. The test will refer you to appropriate debt help if needed.

Want to know what your financial situation will be in the next 12 months if nothing changes? Then do the Toekomstcheck (Future Check, in Dutch).