Cash flow
Cash flow problems can lead to a business's closure
Cash is generated by a business through the sale of goods or provision of a service. It is important that businesses have enough cash to pay employees, buy supplies and cover business expenses.
Cash flow is all the money that comes into and goes out of a business. There must be more cash coming into the business than there is going out to avoid the company going into When a business ceases trading due to not being able to pay its debts. The business assets are sold to pay for the outstanding debts of the business.. This would mean they are no longer able to trade.
Cash flow problems may occur for many reasons:
- low sales
- too much money tied up in stock
- customers taking too long to pay their bills
- suppliers not allowing When a good is received but not paid for until later. or a limited credit period
- owner taking too much money out the business, this is also known as Money taken out of the business by its owner.
- over-Money or capital put into a business for profitable returns, for example interest or income. in new assets such as machinery or equipment
- an increase in expenses