Early signalling: recognise the signs of financial problems

Many financial problems do not arise overnight. They build up gradually. By keeping track of your records every week, you will spot problems sooner and be able to take action more quickly. This is known as early signalling.

What is early signalling?

Early signalling means spotting in time financial risks as they arise. This helps you avoid debts and financial worries. For some entrepreneurs, it starts with 1 customer paying late. For another, it only starts when several customers pay late. You need to spot such a warning sign and know when to take action. The sooner you intervene, the easier it is to make adjustments. If you wait too long, the problems often get worse. 

Recognising signs

You can see signs of financial problems in yourself and in your business. 

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 3 months. Or you can tell by the turnover per 3 months. Is it decreasing by, for example, 10%? 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. 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 stock levels have been rising for several months. 
• You pay invoices with private money. 
• A direct debit no longer goes through.

2. Signs from your financier and the Tax Adminstration

There are also warning signs from outside your business. For example, from your financier and the Netherlands Tax Administration:

• Your bank is asking you additional questions.
• You are unable to pay the interest and repayments on your loan.
• Your business account is frequently in the red.
• You are unable to pay your taxes on time.

Going into the red once is not a reason to panic. But keep an eye on not going over the limit on your business overdraft. 

Can you not pay your taxes on time? See if you can apply for a postponement or a payment plan right away. You pay collection interest on a deferred amount. You cannot defer paying VAT or payroll taxes.

3. Signs in your private life

Your business and your personal life are usually connected to each other. Signs from your personal life and how you feel can also reveal the financial health of your business, for example:

• This month you are making less income from your business than you need privately. 
• You are falling behind on private payments. 
• You feel insecure and stressed. 
• You are not sleeping well and you are feeling worried.
• People around you are concerned about you.

These signs are important. Take them seriously

What can you do?

Early signalling is not a one-off process. It means keeping on top of your records on an almost daily basis to ensure your business remains financially sound. Take action at the first sign of trouble to minimise financial damage. Start dealing with the following issues immediately: 

• Cut purchasing and operating costs. 
• Tighten up your payment terms so your customers pay faster. 
• Minimise inventory. 
• See if your subscriptions such as energy, mobile phone, and internet can be cheaper. 
• Make the best use of tax deductions. 
• Build up a business financial reserve (a buffer) so that you can cover operating costs for about 6 months.

Taking these steps will help you keep control of your business and finances. 

Tools for financial insight

Do the Geldfit Zakelijk test (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).