How do you spot early that your business is getting into trouble?

You recognise problems earliest in your payment behaviour: you pay suppliers later, you postpone paying tax and your credit line fills up. Research among small and medium-sized companies shows that such payment arrears predict financial problems better than ratios from the annual accounts. The annual accounts often only raise the alarm when it is already late.

In this article

1. Does a company go bankrupt suddenly?
2. Which patterns come before a bankruptcy?
3. Why do you not see it in time in your annual accounts?
4. Which signals can you see before they show in the figures?
5. What should you do if you cannot pay tax?
6. Which ways out are there before it is too late?
7. How many companies go bankrupt in the Netherlands?

Does a company go bankrupt suddenly?

Almost never. Bankruptcy is usually the end of a process that lasts years. So there are often years in which you could have stepped in.

Classic research already shows this. Hambrick and D'Aveni compared 57 large companies that went bankrupt with 57 comparable companies that survived. In the companies that went bankrupt, they saw a downward spiral: weak results and little financial room early on, then extreme and changing strategic choices, and finally a sudden deterioration of their market (Hambrick & D'Aveni, 1988).

Belgian research studied bankruptcies through in-depth case studies, from start-ups to established companies. The researchers found four different routes to bankruptcy. Each route has its own causes, but they share one feature: it happens gradually. The researchers write that bankruptcy does not arise overnight (Ooghe & De Prijcker, 2008).

Which patterns come before a bankruptcy?

There are four recognisable patterns: the start-up that never gets off the ground, the growth company that goes too fast, the growth company dazzled by its own success and the established company that falls asleep. Which pattern fits you depends on the age of your company and on the way it is managed (Ooghe & De Prijcker, 2008).

With a start-up lacking enough experience in management or in the industry, things often go wrong from the start. With an ambitious growth company, a large investment turns out badly, and afterwards there is no money left to change course. With a dazzled growth company, management no longer sees the real financial position, because of too much self-confidence. With a company that has fallen asleep, management slowly loses touch with a market that is changing (Ooghe & De Prijcker, 2008).

Note what this research does and does not show. It is based on case studies, and the researchers did not measure how often each pattern occurs. So the four patterns are a tool for recognising your own situation, not a prediction.

Why do you not see it in time in your annual accounts?

Because the annual accounts look back and are often only finished months after the end of the financial year. Moreover, at most companies the risk in the figures only rises sharply shortly before bankruptcy. So when the annual accounts raise the alarm, there is little time left.

A study of 1,234 bankrupt companies from various European countries looked at how bankruptcy risk developed in the annual figures. At 73% of the companies, the risk only became high very shortly before bankruptcy. Profitability, both for the last year and accumulated over several years, weighed most heavily in that final phase (Lukason & Laitinen, 2019).

That does not mean figures are useless. It means that a yearly look is too slow. If you review your figures every month or every quarter, you see a falling margin or a shrinking cash position much earlier than if you wait for the annual accounts.

Which signals can you see before they show in the figures?

The strongest early signal is your own payment behaviour. If you start paying bills later, that is a better predictor of problems than the ratios from your annual accounts. This applies especially to small companies.

Research among small and medium-sized companies compared two ways of predicting financial problems: with ratios from the annual accounts, and with data on payment behaviour and the background of management. The model with payment data performed better, especially in recognising bankrupt companies. The number of payment arrears was the most important factor. The best prediction came from combining both (Back, 2005).

A study of 1,200 small Italian companies confirms this. Predictions became more accurate when past payment behaviour was included alongside ratios. The smaller the company, the larger that gain in accuracy (Ciampi, Cillo & Fiano, 2020). The reason is logical: payment arrears become visible much more often than annual accounts, which appear only once a year (Back, 2005).

You can keep an eye on this yourself, without complicated models:

1. Do you pay suppliers later than the agreed term?

   In research, the number of payment arrears is the strongest predictor of financial problems.

2. Are you postponing VAT or payroll taxes?

   Using tax money as working capital is a sign that cash is too tight.

3. Is your bank credit line at its limit more and more often?

   An overdraft facility is meant for fluctuations, not as a permanent source of money.

4. Is your margin falling month by month or quarter by quarter?

   Profitability weighs most heavily once the risk in the figures starts to rise.

What should you do if you cannot pay tax?

Report it to the Dutch Tax Administration within two weeks. This is called a notification of inability to pay: you let them know that your company cannot pay the tax. If you do this late or incompletely, the Tax Administration can hold you personally liable as a director for the debt (Belastingdienst, 2026).

The notification applies to a company that pays corporate income tax, such as a private limited company (bv). It covers payroll taxes and VAT, among others. The two-week term runs from the moment you should have paid the tax on the return. The notification is not a request for deferral and not a request for debt relief either (Belastingdienst, 2026).

This fits the research. Postponing tax payments is exactly the kind of payment arrear that betrays problems early. If you report it honestly, you protect yourself and face the signal at the same time.

Which ways out are there before it is too late?

The earlier you act, the more options you have. Since 1 January 2021, a viable company with too much debt can reach an agreement with its creditors through the WHOA. The WHOA (the Dutch Act on Court Confirmation of Extrajudicial Restructuring Plans) lets the court confirm such an agreement, even if not all creditors agree.

An evaluation by the University of Groningen and Leiden University, commissioned by the WODC (the research centre of the Dutch Ministry of Justice), concluded that the WHOA generally works as intended. The act helps viable companies avoid bankruptcy. But smaller companies are reached less well. The researchers name unfamiliarity with the act and the costs of court fees and legal and financial advice as causes (WODC, 2024).

The researchers recommend lower court fees and better information for small companies (WODC, 2024). For you as a business owner the lesson is simple. An agreement with creditors only works as long as the company is still viable. If you see the signals early, you still have that choice. If you wait until the annual accounts raise the alarm, you often no longer do.

How many companies go bankrupt in the Netherlands?

In 2025, 3,636 companies and institutions were declared bankrupt, including sole proprietorships. That is 15% fewer than in 2024, when there were 4,270. Trade had the most bankruptcies, followed by construction (CBS, 2026).

In 2026, the decline seems to be over. In September 2026, 320 companies went bankrupt, 44 more than in September 2025 (CBS, 2026). One month says little about a trend, but it shows that a good year is no guarantee for the next.

Behind every bankruptcy there is usually a long run-up. The research keeps pointing the same way: if you monitor your payment behaviour and your margin every month, you see the problems before the annual accounts show them. That gain in time determines whether anything can still be saved.

Sources

• Hambrick, D.C. & D'Aveni, R.A. (1988). Large corporate failures as downward spirals. Administrative Science Quarterly, 33(1), 1-23. doi.org/10.2307/2392853
• Ooghe, H. & De Prijcker, S. (2008). Failure processes and causes of company bankruptcy: a typology. Management Decision, 46(2), 223-242. doi.org/10.1108/00251740810854131
• Lukason, O. & Laitinen, E.K. (2019). Firm failure processes and components of failure risk: An analysis of European bankrupt firms. Journal of Business Research, 98, 380-390. doi.org/10.1016/j.jbusres.2018.06.025
• Back, P. (2005). Explaining financial difficulties based on previous payment behavior, management background variables and financial ratios. European Accounting Review, 14(4), 839-868. doi.org/10.1080/09638180500141339
• Ciampi, F., Cillo, V. & Fiano, F. (2020). Combining Kohonen maps and prior payment behavior for small enterprise default prediction. Small Business Economics, 54(4), 1007-1039. doi.org/10.1007/s11187-018-0117-2
• Belastingdienst (Dutch Tax Administration), Notification of inability to pay taxes and premiums, consulted 14 October 2026. belastingdienst.nl
• WODC, The WHOA works to prevent bankruptcy of viable companies, but reaches smaller companies less well, 22 January 2024. wodc.nl
• University of Groningen and Leiden University, Evaluation of the Act on Court Confirmation of Extrajudicial Restructuring Plans (WHOA), WODC report 3387, 2024. repository.wodc.nl
• CBS (Statistics Netherlands), In December 18 percent fewer bankruptcies than a year earlier, 12 January 2026. cbs.nl
• CBS (Statistics Netherlands), In September 16 percent more bankruptcies than a year earlier, 12 October 2026. cbs.nl