Running a business is never easy, and as accountants, you often see firsthand the early signs when things start to go off track. At AS Advisory, we understand how critical it is to identify financial distress early, not just to save the business, but to ease the stress that owners face during tough times.
A recent report by UNSW Business School reveals that 80% of Australian small businesses face cash flow challenges at some point of their business life-cycle. This isn’t just a statistic, it’s a reality we see daily. While the exact figure of how many businesses struggle within the first five years varies, what’s clear is that early cash flow issues often snowball if left unaddressed.
As trusted advisors, your role is more than reconciling accounts or submitting reports. You are in a position to protect your clients’ livelihoods, and sometimes even their mental wellbeing, by helping them face challenges before they escalate. Below, we’ve outlined five of the most common warning signs of financial distress and shared examples of how early intervention has helped turn things around.
How Accountants Can Spot Early Financial Trouble and Help Clients Turn Challenges into Opportunities
1. Persistent Cash Flow Challenges
If a client is constantly juggling late payments, delaying supplier settlements, or missing debt repayments, it’s time to take a closer look. These early cracks can widen quickly, especially if ignored.
For example, we assisted a large commercial solar EPC business during the peak of COVID-19. Practically overnight, their cash flow dried up while fixed overheads continued to mount. The business was at risk of collapse. Through a carefully managed voluntary administration, we helped them trade through the disruption, protect existing contracts and jobs, and ultimately restructure for long-term viability.
2. Increasing Bad Debts and Slow Debtor Recoveries
When your client’s customers delay payments or start defaulting altogether, working capital tightens. This affects everything from daily operations to their ability to plan ahead.
This happened to an event hire company we worked with. When $600,000 in bookings were cancelled during lockdowns, they couldn’t recover their receivables and their future looked bleak. Through the voluntary administration process, we helped them restructure, raise equity, and exit an expensive lease. With a reset business model and continued staff employment, they emerged more resilient than before.
3. Suppliers Tightening Credit Terms
If suppliers start demanding payment upfront or reduce access to credit, it’s often a sign that your client’s financial standing or reputation is under pressure.
We’ve seen this happen across industries, especially in manufacturing and construction. Supplier relationships become strained just as cash flow tightens, leaving businesses vulnerable. When caught early, there’s often room to renegotiate terms, re-establish trust, or restructure payments. But once supplier confidence is lost, it can be hard to recover.
4. Overdue Statutory Payments
Falling behind on GST, payroll tax, or superannuation isn’t just a compliance risk, it’s a red flag that deeper cash flow issues might be brewing. And left unresolved, it can result in penalties or even director liability.
We helped a premium Tasmanian vineyard project facing this exact issue. Years of underperformance had left the business struggling to meet statutory obligations, and growers hadn’t received returns in years. By reviewing their structure and engaging with investors, we reset the business model and brought in fresh capital. Growers were given the option to exit or continue with equity, turning a failing venture into a renewed opportunity.
5. Deteriorating Accounting Controls and Records
Late financials, messy reconciliations, or breached loan covenants may indicate that the business has lost control over its financial position. This is often a precursor to more serious problems and a signal that professional intervention is needed.
In one engineering and procurement business, poor record-keeping was masking severe shortfalls and hidden contractual risks. We stepped in, worked with stakeholders, and implemented a turnaround plan that helped preserve value and protect entitlements. The key again? Acting before the situation spiraled.
Why Early Intervention Makes All the Difference
When clients start missing payments or pulling away from communication, it’s rarely because they’re indifferent, it’s because they’re overwhelmed. The stress of running a struggling business can be isolating. As their accountant, you may be the only professional they trust enough to open up to.
Our team at AS Advisory regularly partners with accountants to deliver practical, empathetic solutions tailored to each client’s situation. With more than 25 years of experience in turnaround, insolvency, and restructuring, our approach is hands-on and results-driven. We’re here to reduce pressure, help clients regain control, and rebuild their confidence in the future.
Let’s Solve These Challenges Together
If you’re seeing any of these warning signs in a client’s business, don’t wait until it’s too late. A simple conversation could open the door to practical solutions and a more stable future.
Together, we can turn setbacks into comebacks and help your clients move forward with clarity and renewed direction.
Book a free discovery call today, and let’s start the conversation.
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