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Five Common Causes of
Business Failure

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Failure won’t be at the front of many business owners’ minds when they launch a company. However,

Monthly Guides with four in ten UK businesses struggling to make it past ve years, it’s always worth keeping an eye on
the warning signs. In this article, management accountant Kirsty Fitzgerald outlines the ve bad

Delivered to your inbox practices to avoid if you wish to give your business a ghting chance of success.

Poor cash ow management

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You may be sick of being told “cash is king”, but it doesn’t change the fact that poor cash ow
management can lead to the demise of any business. Indeed, even a pro table business can fall victim
to a crippling cash ow crisis, which is often caused by the ineffective management of debtors, high
stock levels, bad debt and late invoicing. Inadequate nancing – or selecting the wrong type of funding
for your business – can also put it on the path to failure. Without access to suf cient growth capital,
whether in the form of personal savings, private equity or debt nance, your business may not have the
“fuel” it needs to grow.

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Losing control of the nances
Any business owner needs to be aware of their nancials and cash position at any given time. The
accurate forecasting of income and costs may lead to a few surprises, but it will ultimately help support
your cash ow. Business owners should also understand and control their costs – acknowledging risks
and opportunities – which should help minimise any nasty surprises. Employing an experienced
accountant, or investing in a good cloud-based accounting solution, can help ease the burden of
nancial management, allowing you to focus on day-to-day business operations.

Bad planning and a lack of strategy

“Failing to plan is planning to fail” – cheesy but true. Quite simply, long-term planning is key to the
success of any business. When mapping out the growth of their business, a business owner needs to
The simple guide to conduct market research to establish who their customers are and what they need. They also need to
recognise their competitors and be proactive regarding trends, to avoid getting left behind. Just look at
understanding Bacs
the numerous bricks-and-mortar retailers that didn’t adapt quickly enough to changing customer
and Bacs payments shopping habits and are now struggling or have gone under as a result.

Weak leadership
Read More A good leader recognises the skills they lack or the jobs they do not have time for and either employs,
outsources or seeks professional advice to ll those gaps. They will also communicate, direct, reward
and offer the opportunity for personal growth to their employees, creating a happy, effective and loyal
team. Poor leadership, on the other hand, leads to demotivated and ineffective teams, which can easily
cripple a business.

Overdependence on a few big customers

An overdependence on a few big customers could easily lead to business failure if one of them
suddenly pulls out – both cash ow and pro t will ultimately be hit. The temptation could then be to
offer discounts to that customer; however, this will only lead to poor margins over the longer term.
Minimise your risk by increasing your customer base, diversifying your product portfolio and
encouraging your customers to sign contracts with a reasonable notice period.
How does collecting via
Here at London & Zurich, we work closely with business of all sizes, assisting them with everything
Direct Debit work? from cash ow management to payment processing. For more information on our Direct Debit and card
payment solutions, don’t hesitate to get in touch today.

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