Cash flow
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 . 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 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
