Financial Red Flags: How to Spot and Fix Money Leaks in Your Business

You’re working hard, bringing in clients, and doing all the right things—so why does it still feel like the money is slipping through your fingers? If your business is making sales but still feels cash-strapped, you might be dealing with a few money leaks. These are subtle (or sometimes not-so-subtle) areas where cash is slipping away unnoticed, slowly draining your profits and adding stress to your finances.

The good news? Once you know what to look for, you can plug the leaks, take control of your cash flow, and feel more confident about where your money is going. Here are some common financial red flags and how to fix them.

1. Inconsistent or Negative Cash Flow

Cash flow is the heartbeat of your business. If money seems to leave faster than it arrives—or if you’re frequently stressed about making payroll or covering expenses—it’s a red flag. Even profitable businesses can run into trouble if cash isn’t managed properly.

What to look for:

• You’re waiting on payments from clients while bills are due now

• You often dip into personal funds to keep the business afloat

• You’re behind on paying vendors, taxes, or yourself

Fix it:

• Review your cash flow monthly (or weekly, if needed)

• Set up systems for faster invoicing and follow up promptly on late payments

• Consider offering early payment discounts or requiring deposits up front

  
  

2. High Overhead Costs

Overhead includes your recurring expenses—think rent, software subscriptions, tools, or staff costs. If your overhead is too high compared to your revenue, your business could be bleeding money even if sales are steady.

What to look for:

• Subscriptions you’re no longer using

• Rent for a space that’s too big or unnecessary

• Team members who are underutilized

Fix it:

• Do a quarterly expense audit to cancel anything you don’t use

• Re-negotiate vendor contracts or consider more affordable alternatives

• Shift to remote or hybrid setups to save on office costs

  
  

3. Pricing That Doesn’t Reflect Your Value

If you’re constantly booked but barely making a profit, your pricing might be too low. Undercharging is one of the biggest money leaks for service-based businesses—especially if imposter syndrome is at play.

What to look for:

• You’re always busy but can’t seem to get ahead financially

• Your rates haven’t increased in over a year

• You feel resentment or burnout from doing too much for too little

  Fix it:

• Compare your rates to industry standards and adjust if needed

• Calculate the cost of your time, overhead, and taxes to set sustainable prices

• Communicate your value clearly and confidently in your marketing

  
  

4. Disorganized or Inaccurate Bookkeeping

If your books are messy, you could be missing out on tax deductions, overpaying expenses, or failing to notice when clients haven’t paid. Without clean records, it’s nearly impossible to make informed decisions or catch financial problems early.

What to look for:

• You avoid looking at your numbers or don’t know your profit margins

• Your accounts are missing receipts or have unclear categorization

• Tax time is always a panic because your books are behind

Fix it:

• Use accounting software to track income and expenses in real time

• Set aside time weekly to review your financials or hire a bookkeeper

• Keep business and personal finances separate with dedicated accounts and cards

  
  

5. Poor Inventory or Project Management

For product-based businesses, too much inventory ties up cash and too little risks lost sales. For service providers, poorly managed projects can lead to scope creep, overtime, and undercharging.

What to look for:

• Unsold inventory collecting dust

• Projects that regularly go over budget or past deadlines

• Difficulty tracking costs on custom orders or client work

Fix it:

• Use inventory or project management tools to track time, costs, and resources

• Improve forecasting by reviewing sales trends and seasonality

• Set clear boundaries and contracts with clients to prevent scope creep

  
  

6. Not Paying Yourself Consistently

If you’re the last person to get paid—or not paying yourself at all—it’s a major red flag. You deserve to earn a salary from your business, and not doing so can lead to resentment and burnout over time.

What to look for:

• You’re constantly “reinvesting” profits instead of taking a paycheck

• You’re using credit cards or side gigs to cover personal expenses

• You can’t remember the last time you paid yourself

Fix it:

• Set a regular paycheck or owner’s draw, even if it’s small to start

• Build your salary into your monthly budget like any other expense

• Review your pricing and margins to ensure your pay is sustainable

  
  

7. Lack of Financial Goals or Planning

Operating without a financial roadmap makes it easy to drift into spending patterns that don’t serve your growth. If you’re not planning for taxes, savings, or growth opportunities, you might miss out on bigger goals or fall short when you need funds most.

What to look for:

• You’re unsure how much you need to make to hit your goals

• You haven’t set aside money for taxes or emergencies

• You’re reactive with money instead of proactive

  
  

Fix it:

• Create a basic financial plan outlining your income goals, expenses, and savings

• Open separate accounts for taxes, savings, and profit

• Check in on your goals monthly and adjust as needed

  
  

Final Thoughts

Money leaks happen to the best of us—especially in the early stages of business growth. The key is to stay curious, not judgmental. Spotting red flags is a powerful first step toward creating a more sustainable and profitable business. With consistent check-ins, clear systems, and a little support, you can tighten up your finances, plug the leaks, and start keeping more of what you earn.

Want to feel calm, cool, and collected when managing your money?

Who doesn’t?! Check out The Ultimate Accounting Checklist, your guide for managing and maintaining your business finances with ease.