At a glance
- Many small businesses face financial problems.
- Accountants are uniquely positioned to help catch problems before they snowball.
- Their role is providing not only financial support, but also acting as a confidante.
Small businesses face constant challenges, many of which stem from financial issues. A recent Dojo study found that almost a third (30 per cent) of small businesses considered financial stress their biggest hurdle for 2024. Nearly 20 per cent don’t have an emergency buffer in place, and 49 per cent have overdue and late payments owed to them.
Facing financial struggles can have broader impacts. A Simply Business report revealed that nearly half (47 per cent) of small business owners experienced poor mental health in the past year, driven by rising costs, irregular income and debt concerns.
Their knowledge of financial data and advisory expertise means accountants are uniquely positioned to detect financial distress among their clients. But what are the key signs they should look for, and how can they address the issues?
What do accountants need to look out for?
Financial distress often reveals itself through cash flow challenges, declining revenue and an increasing reliance on short-term debt.
Jake Darlington, SME Manager at Sapphire, says: “Accountants may notice when a client frequently dips into overdraft facilities, experiences reduced liquidity or delays payments to suppliers – all signs that cash flow is becoming an issue.”
Vineta Bajaj, CFO at Rohlik Group, adds that recognising signs of financial distress in clients involves careful analysis of their financial behaviours and patterns. Issues such as unpredictable cash flows, increasing payables, or breaking financial agreements need to be noted.
Accountants should be particularly alert to shrinking liquidity as a sign of potential problems. Late or sporadic tax filings often indicate cash difficulties.
Bajaj adds that clients repeatedly asking for more credit or shying away from financial discussions can also be cause for concern.
Financial struggles often feel deeply personal for small business owners, and they can find it difficult to know where to start addressing them. We look at three key strategies accountants can take to guide clients through choppy financial waters.
1. Empathy is key
James Woodfall, communication and behaviour specialist and founder of Raise your EI, says: “We pick up on the emotional signals of others unconsciously, and we call that ‘gut feel’. It could be a long pause during a discussion or a heavy sigh that might have your gut telling you that your client is feeling the pressure. Your first response should be empathic, asking a simple question such as ‘I get the feeling something is troubling you’.”
Asking a question like this can prompt struggling clients to open up and share their thoughts, the first step to recovery.
Woodfall adds that accountants can offer a safe and confidential space for business owners to offload: “Easing a little emotional weight may help them consider the options available.”
Says Woodfall, “Being a business owner is lonely, and signs of financial distress may be masked to avoid employees, business partners or even family picking up how you feel. That takes its toll.”
2. Take a solution-driven approach
For Darlington, accountants should take a proactive and solutions-focused approach to help clients. He recommends regular financial reviews and scenario planning, to provide a realistic view of a client’s financial position and allow for adjustments before issues escalate.
There are a number of practical ways accountants can support clients under financial stress. Creating detailed cash flow forecasts, for example, allows clients to anticipate potential shortfalls and make well-informed decisions about prioritising resources. Accountants can also assist with tax planning, arrange manageable payment schedules to avoid penalties, and analyse expenses to enhance budget control and liquidity.
By adopting a proactive approach, accountants can support clients with making sound financial decisions, managing debt, and adapting to economic changes. Says Darlington: “With this level of support, businesses are not only better positioned to overcome today’s challenges but also to achieve sustainable growth and stability.”
3. Find the root cause of the problem
To offer the right guidance, accountants should have a solid understanding of their client’s industry landscape. Bajaj says: “Each sector faces unique challenges—whether it’s a small local retailer adjusting post-pandemic or a tech startup navigating rapid growth. Drawing from experience, the counsel should blend empathy with strategic insight.”
Bajaj also recommends advising clients to adopt rigorous budgeting practices and simulating worst-case scenarios to develop realistic action plans. Accountants can also encourage the use of accounting software for immediate financial insight, and assist clients in prioritising debts, negotiating with creditors, or exploring debt refinancing options.
Running their own business has so many benefits for owners, but it can also be stressful. Accountants can take a proactive role in supporting their clients by recognising early warning signs and offering actionable solutions.
They can provide more than just financial expertise, offering clients someone to lean on in tough times, and can act as both a trusted adviser and a source of support beyond the numbers. By providing consistent guidance, accountants can help them overcome the challenges and drive their business forward to a stronger future.
