How to Tell If a Company is in Financial Trouble: Signs to Look for in an Organization Nearing Bankruptcy


Many companies go through ups and downs. When the economy is in bad shape in particular, the downs can be hard-hitting and may result in catastrophic consequences for employees who are not vigilant about the signs and symptoms of impending financial failure. Don’t stay too long and go down with a sinking ship. Watch for the following concerns.

Paycheck Cashing Becomes Difficult In Troubled Companies

Problems with paychecks are often the major telltale sign that the company is having a serious cash-flow problem. If employees get paid late or have any issues with cashing pay checks, beware. In a non-profit, this can happen as grants come in on a staggered schedule, but a manufacturing company should have enough of a buffer to avoid this problem.

Upper Management Turnover in Failing Firms

Frequent changes in upper management is another common cause for concern. This does happen in stable companies as well, but combined with other factors, this can be an indicator of financial instability. If people in positions in-the-know are leaving, like the company controller or tax attorney, this is particularly worrisome.

Loss of Big Customers Equates to Money Woes

Loss of customers without apparent reason is another cause for concern. If the company is losing customers, they should be aggressively going after the business with new models and products. Another customer issue may be complaints that seem to go unanswered by management as well as complaints from company suppliers and vendors that they are not getting paid timely.

Silence from Company Management- Impending Doom?

Lack of communication from the top is another clue. Most organizations give memo updates or have at least quarterly business communications to employees in the form of meetings. If this suddenly stops, this is a key red flag.


Sudden Exodus of Employees

A sudden exodus of employees at any level, but particularly among those that may be privy to the company’s finances is another warning bell. Having a conversation with an exiting employee or two may prove very enlightening.

Increased Rumors May Mean Trouble Brewing

Every company has a rumor mill but when the tides start to turn, the rumors become more and more bleak and consistent in content. All or many of these factors combined should get you in motion to start a new job search.

Employment for life is a luxury of the distant past and will not be the status quo in the foreseeable future. Employees are their own best advocates and need to watch out for their own individual interests in the workplace.