Cash flow crises rarely appear without warning. The warning signs are usually visible in the financials weeks or months before a crisis hits — if you know where to look.
As an accountant or advisor, you have access to the financial data that tells this story. Here is how to read it.
If a client's accounts receivable balance is growing quarter on quarter — not because revenue is increasing, but because invoices are being paid more slowly — that is a warning sign.
Calculate Days Sales Outstanding (DSO): the average number of days it takes for invoices to be paid. If DSO is trending up, your client's clients are taking longer to pay. This compresses cash flow even if revenue is stable.
An obvious one, but easy to miss in the context of a profitable P&L. Look at the trend in the bank balance over three to six months. Gradual erosion — even from a comfortable starting point — is a signal that cash outflows are consistently exceeding cash inflows.
A business that is drawing on its overdraft more frequently, or that consistently runs close to its overdraft limit, is experiencing cash flow pressure. The overdraft is doing the work that should be done by operating cash flow.
Look at accounts payable ageing. If a client is consistently paying suppliers late — particularly if they are pushing to or beyond 60 days — they are managing cash flow by delaying payment. This is a signal, not a solution.
Missing or deferring GST payments or tax instalment obligations is often one of the last warnings before a serious cash flow crisis. It means the business has exhausted easier options and is now managing a government creditor.
The best time to have the cash flow conversation is well before a crisis. When you see these signs in the data, raising them proactively with the client — framed as an observation rather than an alarm — gives you both time to act.
Most clients will welcome the proactive insight. Being told about a problem before it becomes urgent is one of the most valuable things an advisor can do.
Once you have identified the timing problem, you can offer a practical solution. Invoice finance — specifically FundTap, which connects directly to their existing accounting software — is often the simplest and most appropriate tool for businesses experiencing receivables-related cash flow pressure.
Having a specific recommendation ready when you raise the issue is far more valuable than simply flagging a problem without a path forward.