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Cash flow problems

Reasons cash flow problems may occur

  • low sales
  • too much money tied up in stock
  • customers taking too long to pay their bills
  • suppliers not allowing or a limited credit period
  • owner taking too much money out the business, this is also known as
  • over- in new assets such as machinery or equipment
  • an increase in expenses

Impact of cash flow problems

  • unable to pay suppliers meaning stock is not delivered and production stops
  • may need to find a cheaper supplier which may reduce the quality of products
  • costs may increase due to interest on any extra funds borrowed
  • no money to invest in future growth
  • owner may need to reduce their
  • may have to offer discounts to increase sales
  • unable to pay expenses
  • may need to sell unused assets or make staff redundant

Glencoe Mountain Resort provides a case study of how a business can deal with cash flow problems.