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In this course Kevin Artlett covers the following topics:

Why Red Flags Matter 

• Every business leaves a trail of how it is trading – good or bad
• Accountants are often the first to see warning signs
• By the time issues appear in year-end accounts, it is often too late to act
• spot a failing business from the numbers?”

What Are Red Flags? Proactive vs Reactive 

• A red flag = an early indicator of risk or instability
• Examples:
  • Late filings
  • Poor payment behaviour
  • Increasing debt levels
  • Changes in leadership

Where to Find Red Flags in Practice 

• Statutory filings
  1. Late or non-filing
• Management accounts
  1. Falling margins, losses, declining reserves
• Debtor book / receivables
  1. Increasing debtor days
  2. Aged debt creeping
• Credit reports
  1. CCJs, legal actions
• Client conversations
  1. Behavioural warning signs

Key Red Flags to Watch 

• Financial Red Flags:

• Deteriorating performance
• Increasing borrowing
• Weak liquidity

• Operational Red Flags:

• Frequent changes in directors or finance staff
• Poor documentation or controls
• Complex group structures

• Credit & Behavioural Red Flags:

• Late payments becoming normal
• Requests for extended terms
• Increasing disputes
• Avoidance of communication
• Excuses around payment delays

Impact of Missing Red Flags 

• Impact on Clients:

• Cash flow crisis
• Inability to pay suppliers, staff, HMRC
• Increased borrowing costs
• Insolvency risk

• Impact on Directors:

• Personal stress and pressure
• Poor decision-making
• Loss of control over the business

• Impact on Accountancy Practices:

• Loss of fee income
• Bad debts from unpaid invoices
• Reputational damage
• Increased regulatory scrutiny

1. Reduced practice valuation

Early Intervention & Practical Actions - Practical Steps:

• Review management accounts more frequently
• Monitor debtor days and payment behaviour
• Strengthen cash flow forecasting
• Challenge assumptions (e.g. “they always pay”)
• Encourage earlier client conversations

Collaboration – The Missing Link 

• Accountants:
  • Identify issues
  • Provide financial insight
• Credit professionals:
  • Manage payment behaviour
  • Improve cash collection
  • Support difficult conversations

Benefits of Collaboration:

• Faster intervention
• Better client outcomes
• Reduced risk exposure