Being in financial distress is incredibly worrying for any business owner. When you’re facing County Court Judgements (CCJs), mounting debt and the possibility of insolvency, it can seem like there’s very little light at the end of the financial tunnel.

The latest report from insolvency experts at Begbies Traynor shows a record number of UK businesses finding themselves in financial distress. Numbers have increased by 50% from September to December 2024, with 46,583 businesses falling into the category.

But finding your finances in this perilous state doesn’t have to be the end. There are ways to mitigate the damage and get your business back on track.

What qualifies as ‘financial distress’?

Financial distress is defined as ‘being in significant difficulty in meeting your financial obligations’. In essence, it will usually mean that you no longer have the cash or liquid capital to pay your bills, cover payroll costs or repay your debts.

But what causes a company’s finances to get into such a dire state?

Insufficient cash flow

A lack of cash is a primary cause of financial distress for many affected businesses. Unexpected expenses, delayed payments from customers and rising costs can all contribute to this negative cash flow position.

Declining sales revenue

A drop in sales also means a drop in revenue. This can be due to increased competition, changing consumer preferences or economic downturns. With less money coming in, you lose the ability to meet your financial obligations.

Rising costs

Skyrocketing costs of raw materials, labour or energy can all have an impact. Higher costs and expenses eat into your profit margins, putting major strain on your cashflow and leaving you unable to cover your key outgoings.

Excessive debt

High levels of debt, particularly short-term debt, will lead to high interest payments. These increasing interest rates make it difficult to meet your financial obligations, and also make it unlikely that lenders will offer further funding.

Poor management decisions

Some of the causes of financial distress come from macro, external conditions. But poor strategic decisions, ineffective marketing and inadequate financial planning also play a significant part.

Talk to us about overcoming financial difficulties

If debt is mounting and your cash flow situation is looking dire, the time to take action is now! The sooner you tackle the financial issues in the business, the sooner you can start to bring your debts under control, and your cash flow back to an acceptable level.

Come and talk to the team about your financial worries. We’re here to help you get back on track and to secure the future of your business as a viable enterprise. Call us on 01904 787 973 or book a discovery call with Donald Inglis.